The International Monetary Fund has called on the Bank of England to cut interest rates and resume printing money to boost demand. It has also asked the UK government to prepare plans for deficit reduction if these measures do not work.
In a tough assessment of the UK’s prospects, the fund said the economy had not responded as it had hoped and risks of continued stagnation were high.
The UK is in a double-dip recession after the economy contracted 0.2 per cent in the first quarter, prompting renewed concern about the pace of fiscal consolidation and the lack of measures to boost growth.
The International Monetary Fund said “further monetary easing is required” and should happen with more quantitative easing and a cut in the 0.5 per cent interest rate.
Christine Lagarde, IMF managing director, said the Bank of England had been “nimble” in its responses, easing monetary policy to support growth. “Unfortunately the economic recovery in the UK has not yet taken hold and uncertainties abound,” she added. – (The Financial Times Limited 2012)
