THE STRONG pound is hurting the UK’s exporters, according to a report by the International Monetary Fund (IMF), with the suggestion that sterling is overvalued by as much as 10 per cent.
The IMF’s latest report on the UK is broadly positive, viewing the government policies as “appropriate”, but the global watchdog is worried about the sizeable current account deficit.
The pound has strengthened by more than 13 per cent since a low in July last year, when it dropped to below $1.50. The IMF report yesterday said that the exchange rate was “overvalued by around five to 10 per cent”, contributing to the country’s worsening current account deficit.
“This reinforces the case against the Bank of England making any hasty decisions on raising interest rates,” said John Longworth, director general of the British Chambers of Commerce. Higher interest rates would typically strengthen a country’s currency.
The institution also flagged up an “overshoot” of UK house prices of up to 30 per cent, adding that the “housing cycle is highly volatile” due to fluctuating credit conditions and the country’s massive supply shortfall.