UK households face higher prices into 2027: IMF
Key Points
- IMF projected global inflation rising to 4.7% in 2026
- UK inflation not expected back at target until mid-2027
- UK growth forecast cut to 1.0% for 2026
- Food prices projected to rise 8% as fertiliser costs jump 26%
- Energy prices to stay roughly 25% above prewar levels
UK households face elevated prices well into 2027, with the International Monetary Fund warning that the global fall in inflation has stalled and UK inflation will not return to target until mid-2027.
In its July 2026 World Economic Outlook Update, the IMF projected global headline inflation to rise from 4.1% in 2025 to 4.7% in 2026, before easing to 3.9% in 2027. It said the projections indicate the disinflation trend in place since the beginning of 2024 has stalled, with the 2026 forecast revised up 0.3 percentage points from April.
The UK is expected to be among the later major economies to get price rises back under control.
The Fund projected core inflation returning to target by mid-2027 in the UK, compared with the end of 2027 in the United States and Japan, and only 2028 in the euro area. UK economic growth is forecast to fall to 1.0% in 2026 before recovering to 1.3% in 2027 as the energy shock fades.
Energy is the main driver as the IMF projected energy prices to remain roughly 25% above prewar levels, with oil averaging $89 per barrel in 2026, a 32% increase in crude prices on 2025, and natural gas prices up 22%.
The Fund assumed the Strait of Hormuz begins reopening in mid-July, with conditions only returning to the prewar state by March 2027.
Food bills face pressure too. The IMF projected food prices to rise 8% in 2026, reflecting fertiliser costs jumping 26% alongside more expensive energy and transport.
The Fund said monetary policy will be less supportive as a result, with markets pricing in higher policy rates and central banks in both advanced and emerging economies already raising them.
It advised central banks to keep real rates broadly constant where inflation pressures appear temporary, which may mean lifting nominal rates, keeping borrowing costs higher for longer for mortgage holders.
The IMF added that risks remain tilted to the downside, with renewed Middle East conflict threatening further commodity price volatility, supply chain disruption and higher prices.
