Back in the spring, the IMF said the UK would take the worst hit of any rich country from the Iran war.
On Monday, the fund quietly walked it back.
The IMF bumped its 2026 UK growth forecast to 1%, up from 0.8%.
The new call followed first-quarter data that came in stronger than expected at 0.6% growth.
The Iran war is still a drag, with higher energy prices pushing UK inflation back up.
The fund now expects inflation to hit the Bank of England's 2% target by the end of 2027. That is about a year later than it had penciled in.
But growth is holding up. The IMF called the UK economy "resilient" and said it should recover as the energy shock fades.
The recovery should pick up speed in the second half of 2027. The fund expects the economy to settle back near its long-run path after that.
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Markets had started pricing in hikes from the Bank of England, not cuts, but the IMF wants the bank to keep both doors open.
Its message: hold the Bank Rate at 3.75% for the rest of the year. The Bank Rate is the BOE's main policy rate.
It sets the floor for what mortgages and loans cost across the UK.
The fund said that level is tight enough to keep wages and prices in check without choking growth.
But if the economy wobbles, the BOE should be ready to cut. The fund said it should "respond forcefully if second-round effects prove stronger than anticipated."
The IMF called this an "exceptional uncertainty" moment. It said the bank should be ready to move in either direction.
It also said every choice should be data-driven and made meeting-by-meeting.
The shift is small but real. A central bank with options is a better setup for stocks and gilts than one locked into a single path.
UK rate-sensitive sectors tend to move first when the rate path shifts. That means homebuilders, real estate firms and smaller-cap names.
So far this year, traders had been betting on the Bank Rate staying high or going higher. A more flexible BOE could change that math.
Gilts are also worth a look. Gilts are UK government bonds, and they tend to rally when rate-cut odds rise.
Sterling is the other one to watch. A more dovish BOE tends to push the pound lower, which lifts UK exporters.
Energy prices are still the swing factor. If oil keeps climbing, hikes get back on the table.
If the war eases, cuts come back into play.
The BOE meets again later this year.
That is a long way from the autopilot path markets had penciled in.
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