Independence of central banks 'paramount', warns IMF

Trade tensions and a reversal in the artificial intelligence (AI) boom are among the main risks to global economic growth, the International Monetary Fund (IMF) has warned.

Its comments came in its latest world economic outlook, where it described the global economy as "steady", with growth expected to remain "resilient" this year.

The IMF's forecast was produced ahead of Donald Trump's threat at the weekend to impose tariffs on eight European countries opposed to his proposed takeover of Greenland.

The fund also said the independence of central banks was "paramount" for global economic stability and growth.

The IMF estimates the UK grew by 1.4% in 2025, slightly up from its previous projection of 1.3%. Its forecast for this year remains unchanged at 1.3%, which would make it the third fastest growing economy in the G7 behind the US and Canada. It predicts 1.5% growth in 2027.

Chancellor Rachel Reeves said the IMF had upgraded the UK's growth for the third time since April 2025, and the country was "on course to be the fastest growing European G7 economy this year and next".

But shadow chancellor Sir Mel Stride said: "A 0.1% uptick is not a triumph and the fact Rachel Reeves is celebrating it shows how desperate she has become."

The IMF expects global inflation to fall from an estimated 4.1% in 2025 to 3.8% in 2026 and further to 3.4% the following year.

In the UK, Gourinchas said price changes in regulated industries, such as transport and energy, had kept inflation elevated last year but "that's going to fade away".

The IMF expects UK inflation to return to the 2% target by the end of the year, as a weakening labour market continues to keep wage growth down.

The IMF warned that central bank independence was "paramount for macroeconomic stability and economic growth".

"Preserving the independence of central banks, both legal and operational, remains critical for avoiding the risk of fiscal dominance, anchoring inflation expectations, and enabling them to achieve their mandates," it said.

It comes a week after US Federal Reserve chair Jerome Powell said he was the subject of an "unprecedented" US justice department criminal investigation over his testimony about the bank's building renovations.

He said he believed this was due to Donald Trump's anger over the Fed not cutting interest rates, but Trump said he did not know about the investigation.

Powell's comments prompted central bank heads across the world to declare "full solidarity" with the US Fed chief, while three former heads of the bank strongly criticised the investigation.

Gourinchas said preserving central bank independence would be key to economic success in the years ahead.

Without it, he warned, "the economic environment deteriorates pretty rapidly".

Gourinchas said challenges to central bank independence had emerged elsewhere, particularly in countries with big borrowing needs, as leaders are enticed by the idea that lower interest rates would make it less expensive to fund government spending.

But he warned those dynamics tend to lead to inflation and higher borrowing costs over time.

"The evidence is very clear. It's self defeating," he said.