The news was announced by the IMF on Tuesday, with inflation unexpectedly increasing
A general view of the Bank of England in the City of London. Many economists expect that the base rate will be cut following the next Bank of England meeting on 7 August.
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Prices in the UK are set to be higher than any other G7 nation according to the latest figures released by the International Monetary Fund (IMF).
The latest figures mean Inflation will be at its highest among the G7 states, according to the IMF’s World Economic Outlook, with inflation set to average at 3.4% in 2025.
This figure was revised from a predicted 3.2% previously announced by the fund.
The figures mark an unexpected increase from the IMF’s July forecast.
As part of the forecast, the monetary body also upgraded US growth figures, with 2025 growth revised to 2.0% from a predicted 1.9%.
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UK inflation is set to surge to the highest in the G7 in 2025 and 2026, according to the International Monetary Fund (IMF).
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It comes amid growing uncertainty over Trump’s proposed tariffs.
Canada and France also saw their growth projections reduced amid pressure from tariff headwinds, while the US saw its forecast rise slightly.
Global growth for this year has also been upgraded from 3% to 3.2% in the report, with many economies proving to be more resilient than expected in the face of tariff pressures.
The IMF said growth early in the year surpassed expectations as spending was brought forward, while many economies have also benefited from smaller increases in US tariffs than originally announced.
“Households and businesses front-loaded their consumption and investment in anticipation of higher tariffs,” the report said.
“This gave a temporary boost to global activity in early 2025.”
Chancellor Rachel Reeves said: “This is the second consecutive upgrade to this year’s growth forecast from the IMF. “But know this is just the start. For too many people, our economy feels stuck.
“Working people feel it every day, experts talk about it, and I am going to deal with it.
The inflation figures come weeks before the Chancellor’s autumn budget.
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Russ Mould, investment director at AJ Bell, said: “The UK has an inflation problem which could constrain the Bank of England’s ability to steadily cut interest rates.
“That could weigh on consumers and businesses, potentially leading to more sluggish economic growth.
“The IMF has warned the UK could have the highest rate of inflation in the G7 both this year and next year, raising its expectations to 3.4 per cent and 2.5 per cent respectively.
“That compares to a previous forecast of 3.2 per cent in 2025 and 2.3 per cent in 2026.
“Even though the rate of inflation might slow next year, the IMF’s prediction still puts the figure further away from the Bank of England’s 2 per cent target.
He adds: “An inflation figure starting with ‘3’ is arguably outside of the Bank of England’s comfort zone, so it might be forced to keep interest rates steady.
“Normally that wouldn’t be such a problem if it wasn’t for a fragile jobs market.
“Central banks look at both inflation and labour when making interest rate decisions, and a weak jobs market might traditionally call for rate cuts.
“It suggests the Bank of England is stuck between a rock and a hard place.”