IMF: UK's Inflation Likely Stable Despite Energy Price Surge

The International Monetary Fund does not currently see signs of a wage-price spiral in the UK. Core inflation is expected to rise slightly due to energy price spikes, with a forecast of 2.7% for 2026, up from January's 2.2%. The UK's negative output gap may moderate wage pressures.

The International Monetary Fund (IMF) reports no current evidence of a wage-price spiral in the UK, anticipating only a minor uptick in core inflation driven by energy price increases, according to IMF Chief Economist Pierre-Olivier Gourinchas.

Gourinchas highlighted that core UK inflation is now projected at around 2.7% for 2026, a rise from the 2.2% predicted earlier in January, despite the UK's significant reliance on gas imports.

"The UK economy still presents a negative output gap, offering considerable slack that is moderating certain wage pressures," Gourinchas stated at a news conference. "We must observe closely how the rise in energy prices, particularly affecting consumers, will influence economic dynamics," he added.