May 22 - Inflation has fallen by half a percent, but the IMF says Britain has more at its disposal to kickstart growth. Joanne Nicholson reports.
As Britain gears up towards a summer of celebration with the Queen's Diamond Jubilee and the 2012 Olympics in London, attentions are still focussed on the state of the economy. While inflation fell to its lowest in more than two years, a drop in profits for the retailer Marks and Spencer told an alternative story. Higher fuel prices, worries about job security and government austerity measures have all added to shoppers reluctance to spend money. But, Britain's finance minister, George Osborne, was pleased with the Bank of England's assessment that the rate of inflation will continue to fall over the next year. And speaking at a meeting in London, he enjoyed the praise given by the IMF. SOUNDBITE (English) George Osborne, UK Finance Minister, saying: "The IMF welcomes today the government's announcement last week that it will use the credibility of its balance sheet to go further to boost credit for businesses, housing and infrastructure." But while the news was positive for Britain, at least at home, the IMF's head, Christine Lagarde, said the danger to Britain's economy is still very real because of its exposure to the troubled euro zone. Lagarde suggested there are more tools available to the Bank of England to kickstart growth. SOUNDBITE (English) Christine Lagarde, IMF Managing Director, saying: "We believe it has quantitative easing measures available that could be resumed - number one. We also believe there is room in terms of interest rates that could be used as well prior to considering the improved fiscal consolidation at budget neutral basis." So, back to good old Marks and Spencer. Their 1.2 percent fall in profit is its first decline in three years. Their latest advertising campaign is aimed at capturing the mood of the nation while all of the summer's events take hold. It's hoped that in the wake of the torrential rain that's blighted spring summer fashion sales, the Jubilee celebrations will mark the start of an upturn for British retail. Joanne Nicholson, Reuters