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Damming new report from International Monetary Fund (IMF) has warned that UK inflation is set to surge to the highest in the G7 in 2025 and 2026. The fund said it expects UK inflation to average at 3.4% in 2025, increasing from its previous prediction of 3.2%.

The forecasts also showed that UK inflation is expected to slow slightly to 2.5% next year, but this is nonetheless above the 2.3% prediction from earlier this year. It means UK households are therefore expected to face the highest rate of price inflation across all the G7 group of advanced economies over the two years. IMF chief economist Pierre-Olivier Gourinchas said inflation in Britain appeared to be “moving in the wrong direction.”

Rachel Reeves will today travel to Washington DC to meet the fund alongside political leaders and central bank chiefs.

The Chancellor is to champion Britain as a place where investors and businesses can count on economic stability during meetings at the IMF and the World Bank.

She will point to the Government’s National Wealth Fund as among the steps taken to create an investor-friendly environment in the UK.

Ahead of the journey, Ms Reeves said: “Our Plan for Change is delivering national renewal built on the rock of economic stability – the foundation for more security, more respect and more opportunity for every part of the UK.

“In Washington I will showcase Britain’s commitment to fiscal responsibility – while creating the conditions to boost productivity, attract investment and secure our place as a strong and credible partner in a stable global economy.”

While in Washington, the Chancellor is also expected to attend a Ukraine round table to drum up investment for the war-torn nation and will meet with US financial firms to highlight what the UK has to offer to them.

In better news for the UK, the IMF also predicted that the UK economy is expected to grow by 1.3% this year, after being boosted by strong growth in the first half.

It represents an improvement against the previous IMF forecast of 1.2%.

However, the IMF has now cut its growth prediction for next year from 1.4% to 1.3% as global trade pressures threaten to impact on many economies.

Canada and France also saw their growth projections reduced amid pressure from tariff headwinds, while the US saw its forecast rise slightly.

Global growth for this year has also been upgraded from 3% to 3.2% in the report, with many economies proving to be more resilient than expected in the face of tariff pressures.

The IMF said growth early in the year surpassed expectations as spending was brought forward, while many economies have also benefited from smaller increases in US tariffs than originally announced.