IMF believes that rates should be cut to 3.5% by the end of 25’

The International Monetary Fund (IMF) has proposed that interest rates in the UK be lowered to 3.5% by the end of the following year.

The Bank of England may reduce its main rate from its present level of 5.25% by as much as seven times in such a move.

The IMF said as much when it raised its growth estimate for the UK in 2024, although it cautioned against more tax cuts.

Following a slight recession last year, the UK's economy was "approaching a soft landing," according to the IMF.

It increased its growth estimate for this year from 0.5% to 0.7%, and for 2025 it projected growth of 1.5%.

The rate of price growth in the UK, or inflation, is predicted to rise slightly over the remainder of the year before "durably" stabilising at the Bank of England's target rate in early 2025, the Fund said, despite the fact that it is likely to fall close to the bank's 2% objective on Wednesday.

The IMF said it would not have advised the recent National Insurance cutbacks "given their significant cost" and cautioned that the incoming administration would have to make "difficult choices" over taxes and expenditure.

Furthermore, the Fund projects that during the next five years, the government will need to spend a substantial amount more on public services, which means that its self-imposed goal of reducing debt as a percentage of GDP will not be achieved. Due to this, there is a yearly deficit of around 1% of the UK's GDP, or £30 billion.

Additionally, the IMF declared that it would "advise against additional tax cuts" in light of the situation of the public finances.

Additional taxes on property, inheritance, vehicle usage, and VAT should be mandated claims the IMF.

Finally, it suggests that the state pension's triple lock—a government pledge to grow benefits by the rate of wages, inflation, or 2.5%, whichever is higher—be discontinued and that increases be solely based on inflation.

(Sources: bbc.co.uk)