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(Bloomberg) — Britain will grow faster than any other major European economy this year and next but continue to lag behind the US and Canada among Group of Seven industrialized nations, according to the International Monetary Fund.
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In an update to its World Economic Outlook, the Washington-based economic supervisor raised its global growth forecasts to reflect both the improved trade backdrop and the fiscal stimulus from President Donald Trump’s One Big Beautiful Bill Act.
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The UK, the European Union, China and Japan have struck trade deals with the US to avoid the most punitive tariff rates Trump was threatening. The IMF said the US effective tariff rate used in its latest projections was 17.3%, down from 24.4% in its April WEO forecast, and the rate for the rest of the world was 3.5% compared with 4.1%.
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Its UK outlook was unchanged from May when the IMF announced a modest upgrade in its Article IV health check on the economy. Britain is expected to grow 1.2% this year, faster than the 1.1% forecast in April, to reflect improved trading terms with the US after striking an early deal, and 1.4% in 2026.
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Of the European G-7 members, Germany and Italy were also upgraded by 0.1 percentage point in 2025 but growth will be sub-1% for both countries this year and next. France grows 0.6% and 1%, respectively, in the IMF projection.
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The fund drew attention to the spike in UK government bond yields and noted that markets expect the Bank of England to cut interest rates twice more to 3.75% this year but issued no further comment.
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Countries that have not raised tariffs but are exposed to the global impact of Washington’s levies will “face a demand shock.” The UK fits that definition. “Central banks could, in this case, gradually reduce the policy rate,” the IMF said.
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