Ruth Mitchell

IMF supports UK economic policy

The International Monetary Fund (IMF) has reportedly concluded that no changes are needed to UK economic policy.

It said weak economic growth and rising inflation had been “unexpected”, but that they were “largely temporary”.

But its annual report warned that “there are significant risks to inflation, growth and unemployment”, which may need a policy response.

It predicted the UK economy would grow 1.5% in 2011, down from its forecast of 1.7% in April and 2% in November 2010.

But it maintained its medium-term forecast at 2.5%.

Policies suggested if growth remained low for an unacceptably long time included expanding the Bank of England’s programme of asset purchases or having a temporary tax cut.

Chancellor George Osborne told the national press: “I welcome the IMF’s continued strong support for our overall macroeconomic policy mix, including our deficit reduction strategy,”

“The IMF have publicly asked themselves the question ‘whether it is time to adjust macroeconomic policies’ - in other words, is it time to change course? And they have concluded definitively that ‘the answer is no’.”

But shadow chancellor Ed Balls said Mr Osborne should not take too much comfort from the IMF report.

He said: “It says it all about George Osborne that he hails an IMF forecast that implies rising unemployment and predicts slower growth. His complacency about the state of the economy is concerning.”

The IMF pointed to rising commodity prices and the increase in VAT as temporary problems for inflation.

It predicted that inflation would remain above 4% for most of the year, but would return to its target rate of 2% by the end of 2012 as oil and food prices settle down.

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