United Kingdom: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the United Kingdom

The 2023 Article IV Consultation with the United Kingdom discusses that market stress following the September 2022 “mini-budget” has dissipated, in the context of a successful financial stability intervention by the Bank of England (BoE) and two prudent budgets. The post-pandemic recovery was disrupted by the sharp energy price shock due to Russia’s war in Ukraine; labor force participation has declined, mainly because of rising long-term illness; and large policy rate increases—needed to arrest high and sticky inflation—have tightened financial conditions. The overarching policy objectives are price and financial stability, while reforming the fiscal and financial frameworks, and boosting sustainable, medium-term growth. Monetary Policy will need to be tightened further to arrest inflationary pressures, which have shown greater-than-expected persistence, and durably bring inflation to the 2 percent target. Fiscal Policy should remain aligned with monetary policy in the fight against inflation and account for very significant medium-term pressures related to service delivery (especially healthcare), and needed investments in skills, innovation, infrastructure, and the green transition.