The International Monetary Fund is not seeing evidence of a wage-price spiral in Britain at the moment, and the Fund anticipates only a small increase in core inflation due to war-driven energy price spikes, IMF chief economist Pierre-Olivier Gourinchas said on Tuesday.
Gourinchas said that core UK inflation is now forecast around 2.7% for 2026, up from 2.2% forecast in January, despite Britain’s heavy dependence on gas imports.
“The UK economy still has a negative output gap in our estimate, so there is quite a bit of slack, and that actually is moderating some of the wage pressures,” Gourinchas told a news conference. “Now we’ll have to see and watch how the increase in energy prices, especially when they get to consumers, whether that translates into a different dynamic.”
(Reporting by David Lawder)
