IMF urges UK to jump-start economy The International Monetary Fund has urged the UK to take more aggressive action to jump-start its ailing economy and warned that plans for fiscal consolidation may need to be scaled back if conditions remain poor into 2013. The IMF said on Thursday that Britain needed to counter its stalling recovery, and the risk of a worsening of the eurozone crisis, through further monetary easing and more government investment. "Repair and rebalancing of the UK economy is likely to be more prolonged than initially envisaged," the IMF said. Confidence is weak and uncertainty is high. Earlier this week, the Fund slashed its forecasts for UK growth by more than for any other advanced economy. The IMF now expects the economy to expand by just 0.2 per cent in 2012 and 1.4 per cent next year. The IMF said that if the recovery failed to gather pace by the early part of 2013, then the government would need to slow the pace of fiscal tightening. "Measures in such a scenario should focus on higher infrastructure spending and temporary tax cuts that are targeted so as to boost their multipliers," it said. The Fund's calls will come as a further blow to the Treasury and the Bank of England, which has recently announced an additional £50bn worth of quantitative easing and Funding for Lending, a scheme aimed at making more and cheaper credit available to UK households and businesses, to boost the economy. The IMF commended the BoE's "bold monetary stimulus," but said more easing was needed, including further cuts to the Bank's official policy rate. An IMF official said in a conference call: "In normal times, rate cuts only impact short-term rates. But we think that, at the moment, lowering the policy rate would have a one-for-one effect on interest rates way out on the yield curve. The Fund expects inflation to fall below the Bank's 2 per cent target in the years ahead. The rate-setting Monetary Policy Committee has recently discussed cutting the bank rate from the current record low of 0.5 per cent. But analysts regard such a move as unlikely, at least for now. The Fund urged the government to consider spending more on investment, which it could fund through property tax reform and spending cuts on items with low fiscal multipliers. The IMF said Funding for Lending, through which banks can access cheap funds of up to £80bn in return for a commitment to lend to the economy, could be more successful than earlier measures aimed at improving credit conditions. However, the Fund warned that the scheme could prove insufficient and that more measures might be needed. The Fund acknowledged that the BoE's ability to engage in more quantitative easing was limited, given that yields on government debt were already very low. The BoE already plans to buy £375bn worth of assets - the vast majority of which are gilts - through the quantitative easing programme.