The International Monetary Fund (IMF) has predicted that the Bank of England could cut interest rates three more times this year, despite the UK facing higher-than-expected inflation.

Inflation in the UK is now forecast to be 3.1% for 2025 – the highest among advanced economies – largely driven by higher utility and energy bills. However, the IMF believes this spike will be temporary, paving the way for further rate reductions. It expects inflation to fall back to 2.2% by 2026, close to the Bank of England’s long-term target.

For business owners, potential rate cuts offer both opportunities and challenges:

  • Lower borrowing costs could make it cheaper to invest, expand, or manage cash flow.
  • Persistently high costs – especially energy and utilities – could still squeeze margins in the short term.
  • Global uncertainty, including US tariffs, could affect supply chains, trade opportunities, and demand, depending on your sector.

The IMF also downgraded its growth forecast for the UK economy in 2025 from 1.6% to 1.1%, reflecting the impact of global trade tensions, particularly from new US tariffs. While this is a slowdown, it still places the UK ahead of France, Italy, and Germany.

The message for businesses is clear: while interest rate cuts could support borrowing and investment, ongoing cost pressures and global instability mean careful financial management and resilience planning remain essential.

See: https://www.bbc.co.uk/news/articles/cy9vy7yq849o