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| IMF boss Lagarde says she wants Britain to stay in EU | IMF boss Lagarde says she wants Britain to stay in EU |
| (about 1 hour later) | |
| The managing director of the International Monetary Fund has said she wants Britain to stay in the EU, warning that a looming Brexit referendum posed a risk to the UK economy. | The managing director of the International Monetary Fund has said she wants Britain to stay in the EU, warning that a looming Brexit referendum posed a risk to the UK economy. |
| In an upbeat assessment, Christine Lagarde said the UK was enjoying strong growth, record employment and had largely recovered from the global financial crisis. | In an upbeat assessment, Christine Lagarde said the UK was enjoying strong growth, record employment and had largely recovered from the global financial crisis. |
| Related: IMF chief Lagarde highlights Brexit referendum as risk to strong UK economy - live | |
| Presenting the IMF’s annual healthcheck of the economy alongside George Osborne, Lagarde said there were risks to the outlook, including from the housing market, but she was generally positive. “The UK authorities have managed to repair the damage of the crisis in a way few other countries have been able to do,” she said. | Presenting the IMF’s annual healthcheck of the economy alongside George Osborne, Lagarde said there were risks to the outlook, including from the housing market, but she was generally positive. “The UK authorities have managed to repair the damage of the crisis in a way few other countries have been able to do,” she said. |
| Lagarde said the IMF would work through various scenarios for the EU referendum outcome in its next assessment of the UK in May 2016. “On a personal basis … I am very, very much hopeful that the UK stays within the EU,” she added. | Lagarde said the IMF would work through various scenarios for the EU referendum outcome in its next assessment of the UK in May 2016. “On a personal basis … I am very, very much hopeful that the UK stays within the EU,” she added. |
| The chancellor said the IMF’s latest assessment of the UK “could hardly be more positive”. He added that in the past the IMF had been critical of the government’s strategy, such as when it called for higher spending on public investment. | The chancellor said the IMF’s latest assessment of the UK “could hardly be more positive”. He added that in the past the IMF had been critical of the government’s strategy, such as when it called for higher spending on public investment. |
| “Over the years I’ve been attending this article IV press conference, it has sometimes been controversial, as people pointed to the differences between our plan and the IMF’s advice,” Osborne said. “Today the IMF could not be clearer. They say that our economy is stronger, more resilient and has more jobs. The IMF believe our approach to fixing the public finances is appropriate and transparent. | “Over the years I’ve been attending this article IV press conference, it has sometimes been controversial, as people pointed to the differences between our plan and the IMF’s advice,” Osborne said. “Today the IMF could not be clearer. They say that our economy is stronger, more resilient and has more jobs. The IMF believe our approach to fixing the public finances is appropriate and transparent. |
| “This is the strongest IMF assessment of the UK economy in the five years I have been doing this job. I take this as an endorsement of our plan to fix the roof while the sun is shining.” | “This is the strongest IMF assessment of the UK economy in the five years I have been doing this job. I take this as an endorsement of our plan to fix the roof while the sun is shining.” |
| Introduced @Lagarde at press conference for IMF’s article IV update on UK economy @hmtreasury today https://t.co/H9vWCzVJwW | Introduced @Lagarde at press conference for IMF’s article IV update on UK economy @hmtreasury today https://t.co/H9vWCzVJwW |
| The IMF, which is based in Washington, also used its assessment to recommend that interest rates remain at their record low of 0.5% until there were clearer signs of inflationary pressures. Its report on the UK was delayed for six months due to the general election. | The IMF, which is based in Washington, also used its assessment to recommend that interest rates remain at their record low of 0.5% until there were clearer signs of inflationary pressures. Its report on the UK was delayed for six months due to the general election. |
| The UK’s recent economic performance had been strong and “considerable progress” had been made in tackling underlying problems, the IMF said. | The UK’s recent economic performance had been strong and “considerable progress” had been made in tackling underlying problems, the IMF said. |
| While forecasting that annual growth would continue to average just over 2% for the next few years, the IMF said there were a number of risks to its “broadly positive outlook”. | While forecasting that annual growth would continue to average just over 2% for the next few years, the IMF said there were a number of risks to its “broadly positive outlook”. |
| “House price growth has eased somewhat over the past year, but remains high,” the IMF said. It added that government reforms had made mortgage lenders more resilient, but expressed concern about the ratio of household debt to income, which had left some households “vulnerable to income and interest rate shocks”. | “House price growth has eased somewhat over the past year, but remains high,” the IMF said. It added that government reforms had made mortgage lenders more resilient, but expressed concern about the ratio of household debt to income, which had left some households “vulnerable to income and interest rate shocks”. |
| Noting that the Bank of England might need to take further action to cool the housing market, the IMF said small-scale buy-to-let landlords could be “relatively exposed” if expected returns did not materialise. | Noting that the Bank of England might need to take further action to cool the housing market, the IMF said small-scale buy-to-let landlords could be “relatively exposed” if expected returns did not materialise. |
| Tougher limits on home-loan-to-income ratios or loan-to-value caps might be needed from the Bank, it said. “The authorities should extend the Bank’s financial policy committee’s powers of direction to the buy-to-let market to mirror those they currently have over the owner-occupied market. In addition, the authorities should continue to monitor the parameters of the help-to-buy programme and consider if they need to be adjusted.” | Tougher limits on home-loan-to-income ratios or loan-to-value caps might be needed from the Bank, it said. “The authorities should extend the Bank’s financial policy committee’s powers of direction to the buy-to-let market to mirror those they currently have over the owner-occupied market. In addition, the authorities should continue to monitor the parameters of the help-to-buy programme and consider if they need to be adjusted.” |
| The IMF also highlighted Britain’s poor productivity record and the size of the twin budget and current account deficits. “The current account deficit is similarly not a result of funding a household credit boom, but nonetheless is strikingly large. Notwithstanding a flexible exchange rate and independent monetary policy, confidence shocks could reduce external capital flows into the UK, which could adversely affect growth,” it said. | The IMF also highlighted Britain’s poor productivity record and the size of the twin budget and current account deficits. “The current account deficit is similarly not a result of funding a household credit boom, but nonetheless is strikingly large. Notwithstanding a flexible exchange rate and independent monetary policy, confidence shocks could reduce external capital flows into the UK, which could adversely affect growth,” it said. |
| Osborne said the government was trying to address the challenges identified by the IMF. “Yes, there are still risks. The IMF have identified the risks, and they are the same risks we’ve identified and are taking action to prevent,” he added. | Osborne said the government was trying to address the challenges identified by the IMF. “Yes, there are still risks. The IMF have identified the risks, and they are the same risks we’ve identified and are taking action to prevent,” he added. |