IMF tells Britain to consider rate cut.....
The International Monetary Fund (IMF) has said the UK's continuing economic weakness means authorities should consider more Quantitative Easing (QE) and even cutting interest rates. Its annual look at the UK economy endorsed the government's deficit cutting plan, saying it was essential. It said monetary stimulus had helped the economy, but it remained flat. The IMF said the Bank of England should "reassess the efficacy" of cutting rates below 0.5%.
The report says that the UK has made "substantial progress" towards achieving a more sustainable budgetary position and reducing fiscal risks. The IMF's managing director, Christine Lagarde, gave a strong endorsement to those moves at a media conference in London: "When I look back to 2010 and what could have happened without fiscal consolidation I shiver." Pointing to what it calls the "global importance" of the UK's financial centre, the IMF report praises policies that have helped build up capital "buffers", and the strengthening of regulation within the UK.
But it says there are many downside risks, not least from events within the eurozone. It also says the rebalancing of growth between the public and private sectors has not fully materialised. Ms Lagarde said at the media conference: "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% in 2013. The global body's revised UK forecasts now match those of the UK's independent Office for Budget Responsibility. But both are more optimistic than most independent UK economists, who expect economic growth of about 1.6% next year.