The IMF’s annual look at the UK economy said monetary stimulus had helped the economy but it remained flat and that the Bank should consider more quantitative easing and even cutting interest rates.
UK interest rates have been held at a record low of 0.5% for 38 months and the Bank’s quantitative easing programme has purchased £325bn in assets so far.
The IMF also endorsed the government’s deficit cutting plan saying it was essential and added that the UK had made “substantial progress” towards achieving a more sustainable budgetary position and reducing fiscal risks.
Christine Lagarde, managing director of the IMF, gave a strong endorsement to those moves at a media conference in London.
She said: “When I look back to 2010 and what could have happened without fiscal consolidation I shiver.”
The IMF report praised policies that helped build up capital “buffers” and the strengthening of regulation within the UK but added that there were many downside risks, not least from events within the eurozone.
It also said the rebalancing of growth between the public and private sectors had not fully materialised.
Lagarde said: “Stresses in eurozone affect the UK through many channels - growth is too slow and unemployment too high.”
She outlined the work that went into providing the report: “It takes a team of more than seven members on a two-week mission [to compile the report]. They spend those 10 days talking to multiple stakeholders - both official and non-official - checking the numbers.”
The IMF recently forecast UK growth of 2.0% in 2013. The global body's revised UK forecasts now match those of the UK's independent Office for Budget Responsibility which predicts 2.0% growth in 2013.
