IMF sees inflation "significant risk" in Britain

The International Monetary Fund (IMF) said on Monday that it saw inflation the No. 1 challenge for the British economy in 2011.

"There are significant risks to inflation, growth and unemployment," the Washington-based financial institution said in its annual report on the British economy.

The IMF said the country's inflation "is likely to remain above 4 percent for most of 2011." This is one of the highest inflation levels among advanced economies.

It said that spiking commodity prices and large indirect tax hikes have boosted headline inflation.

However, the so called "core inflation," which excludes volatile energy and food prices, remains around 2 percent.

With commodity futures indicating that oil and food prices will stabilize, inflation is expected to return near the target around the end of 2012.

The IMF slightly downgraded its growth forecast for the British economy to 1.5 percent, compared to 1.7 percent in its last projection in April.

Over the medium term, it foresees real GDP growth "accelerating gradually" to around 2.5 percent.

The fund noted that the weakness in economic growth and a rise in inflation over recent months in Britain was "unexpected," which may require a policy response.

Still, the IMF supported the country's ongoing macroeconomic policies, which focus on tackling fiscal challenge and promoting growth.

"Strong fiscal consolidation is underway and remains essential to achieve a more sustainable budgetary position, thus reducing fiscal risks," it said.

The implementation of a wide-ranging policy program, the post-crisis repair of the Briitish economy is underway, it added.

Source: Xinhua

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