LONDON—The International Monetary Fund warned Friday that uncertainty over the final result of the U.K.’s approaching referendum on membership of the European Union could damage the British economic system, and said it would publish a total assessment of the hazards surrounding a British exit from the bloc in May.
The fund mentioned that “uncertainty linked with the result of the prepared referendum on EU membership could weigh on the outlook” for the U.K., a single of a handful of potential dangers it discovered in a regular wellness examine of the economy.
IMF Handling Director Christine Lagarde stated that fund officers will take a look at the expenses and rewards of a variety of different associations among the U.K. and European Union at its next “article four” health check in May.
“What we will do is commit a whole lot of our collective brainpower so that for the next article four we can have a sound assessment,” she stated, talking to reporters.
She added that in her personal look at she is “very, very significantly hopeful that the U.K. stays in the European Union.”
The IMF’s evaluation underscores how the U.K.’s economic prospects are intently tied to the EU referendum, which Prime Minister David Cameron has pledged to maintain just before the finish of 2017.
Mr. Cameron is looking for to renegotiate the conditions of British membership in important areas such as sovereignty and immigration.
The IMF chief highlighted how the U.K.’s foreseeable future prospects will count on troubles this kind of as obtain to the single marketplace if voters decide on to leave, and the character of Britain’s romantic relationship with the EU if they make a decision to remain.
“As economists we would like as minor uncertainty as feasible,” she stated.
In its report Friday, the IMF explained that the Lender of England should not hurry to increase interest costs in the U.K. but may possibly want to get other methods to end the U.K. house marketplace overheating.
The fund said that “monetary policy must remain on hold until finally inflationary dangers are clearer.”
The fund’s evaluation is broadly in line with that of BOE officials, who signaled final month they are in no hurry to elevate interest costs as long as inflation continues to be subdued. Traders doubt the central bank will raise borrowing fees until late 2016 or early 2017, in accordance to fascination-rate derivatives that observe the BOE’s benchmark curiosity fee.
Buyer costs fell .1% on the yr in October and the fund stated domestic and intercontinental price pressures are muted. It additional that the expenses of way too-low inflation are better than the fees connected with an overshoot of the BOE’s 2% inflation aim.
The IMF additional, even so, that the central bank demands to carefully check the actual-estate market to prevent risky lending undermining the economic system. It mentioned restrictions on big mortgages and other “macroprudential” actions applied very last calendar year have “eased but not eliminated” the dangers related with Britain’s housing marketplace.
Fund officers flagged particular concerns about acquire-to-enable lending, exactly where non-public landlords borrow huge sums to acquire properties for rental, as well as professional actual estate. They also famous that some homes could discover by themselves overstretched when fascination costs begin to rise.
They concluded that “further macroprudential steps may possibly be necessary” to deal with the dangers developing in the home industry, possibly including stricter lending specifications.
Officials at the BOE have previously created a similar assessment, warning this month that they ended up keeping a close eye on pockets of the housing marketplace like buy-to-allow.
General, the fund’s evaluation of the U.K. financial system and its prospects was good.
It said the nation’s recent financial overall performance has been strong and lent its help to Treasury chief George Osborne’s program to near Britain’s budget deficit in the up coming 5 many years.
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