Susannah Streeter, chief investment strategist at Wealth Club, said: “While on the face of it, the IMF’s reassessment of the inflation outlook for the UK appears to be good news, fresh upheaval in the Middle East is still likely to dampen sentiment.
“The Bank of England has already been in a holding pattern, with policymakers erring on the side of caution as they wait for more evidence about the strength of inflationary pressures.
“The IMF’s forecasts lend further support to that wait-and-see approach. There are conflicting forces at work – a sluggish economy and a softening labour market on one hand, but the prospect of higher energy prices feeding through into inflation on the other, and policymakers are likely to want more data before making their next move.
“However, the Bank may still be forced to tinker with monetary policy if a sustained escalation in the conflict with Iran throws a spanner in the works, sending energy prices higher again and putting inflation back on the boil.”
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