IMF raises UK growth forecast and backs Reeves’s deficit reduction plans; bonds recover after sell-off – as it happened

The International Monetary Fund's endorsement of Chancellor Rachel Reeves's fiscal strategy provides crucial external validation at a moment when UK government bonds have faced intense pressure. The IMF's upgraded growth forecast suggests Britain's economic trajectory has improved from earlier pessimistic assessments, offering political cover for Labour's tax-and-spend budget choices. More significantly, the Fund's emphasis on maintaining deficit reduction discipline signals concern about fiscal credibility in an environment where sovereign borrowing costs matter acutely. With gilt yields having spiked recently, the IMF is essentially warning against any temptation to abandon consolidation plans when political pressures mount. For investors, this represents a key institutional anchor: the IMF remains willing to backstop Britain's fiscal reputation, but only if the government demonstrates commitment to medium-term sustainability. The bond market's subsequent recovery suggests investors heard the message, though fragility remains given elevated debt servicing costs and modest growth prospects ahead.