Bank of England chiefs tipped to cut interest rates twice more before the end of the year to aid growth
The Washington-based body believes the rate will come down from 4.25 per cent.
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However, the pace of reductions around the world will be slower than previously forecast.
The Bank of England is set to make its decision on rates next week.
The IMF also upgraded its global growth rate marginally to 3 per cent for this year.
It predicted the UK would be the third fastest growing G7 economy this year and in 2026.
There has been a marginal upgrade to UK growth which is expected to rise by 1.2 per cent this year, which is 0.1 per cent higher than expected back in April.
The global upgrade since April was largely driven by US tariffs being lowered since higher rates were first announced by Donald Trump.
Warnings were also sounded over conflict in the Middle East, with possible risks to global shipping and trade, which could push up oil prices.
Chancellor Rachel Reeves said: 'The IMF's forecasts show that the UK remains the fastest-growing European economy in the G7 despite the global economic challenges we are facing.'
Workers' pay across the UK has slowed as businesses face increased staffing costs making an interest rate cut next month "more likely".
Average weekly earnings, excluding and including bonuses, rose by 5% between March and May, according to the Office for National Statistics (ONS).
Raising taxes will kill off growth, Reeves warned as she pledges to rip up business red tape
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