UK Inflation a “Major Risk” as Global Economic Outlook Darkens

The United Kingdom’s persistent inflation has been identified as a “major risk” in a new global economic assessment that warns of a darkening outlook for the world. While the UK’s 2025 growth forecast saw a minor upgrade to 1.3%, the dominant story is the projection that it will have the highest inflation in the G7.
The report, from a preeminent financial institution, forecasts UK inflation will average 3.4% next year. The chief economist expressed concern that public expectations of high inflation are becoming entrenched in Britain, making it harder to bring prices back under control. This has led to a strong recommendation for the Bank of England to avoid premature interest rate cuts.
This domestic challenge is set against a gloomy global backdrop. The world economy’s “unexpected resilience,” which led to a 3.2% growth forecast for this year, is considered fragile. The long-term outlook is described as “dim,” largely due to the anticipated negative impact of US trade tariffs on business investment, which is yet to fully materialize.
Other global risks that could exacerbate the UK’s situation are also highlighted. These include the economic drag from restrictive immigration policies and the potential for a sharp “correction” in “stretched” global stock markets, which could destabilize financial conditions worldwide.
In this context, the UK’s inflation problem is not just a domestic issue but a point of vulnerability in an already fragile global system. The report suggests that controlling this G7-leading inflation will be a critical test for British policymakers in the coming years.