IMF: BoE stance appropriate for now

By FXstreet.com | July 28, 2014 AAA

FXStreet (Łódź) - The International Monetary Fund released a report on Monday in which it said that the Bank of England’s monetary policy is appropriate for the current state of the economy, but recommended adjusting the stance in case inflation accelerates.

Although the IMF didn’t see a case for a rate hike in the nearest future, it suggested that the central bank might consider such a move if the risk of a bubble in the housing market persists. It also said that the BoE should start revealing what course it plans to take once it starts tightening policy, in order to prevent turmoil on financial markets.

"With prospects of a rate rise strengthening, the Bank will need to announce soon what the new monetary control framework will be and how the transition to it will be managed," the report said.

The IMF also suggested that the pound was overvalued by 5-10% and that UK banks might need to make additional efforts to boost capital in the medium term.

Nevertheless, the IMF expressed satisfaction with UK’s economic recovery which is sees as much more balanced than a year ago.

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