Sterling declined steadily today. At the time of writing, GBP/USD was 0.33% lower at $1.6371, up from an earlier low of $1.6367.
The market seemed to focus on the coalition government’s current economic plans, with some discussions around the ‘austerity measures’ and whether they should be leniently revised to reinvigorate growth. The IMF today downgraded its GDP growth forecast for 2011 to 1.5% from 2%, however, they maintained their medium-term GDP estimate at 2.5%.
The IMF said inflation will remain above 4% throughout the year before falling back to the 2% by the end of 2012. ‘The weakness in economic growth and rise in inflation over the last several months was unexpected. This raises the question whether it is time to adjust macroeconomic policies. The answer is ‘no’ as the deviations are largely temporary. Strong fiscal consolidation is underway and remains essential to achieve a more sustainable budgetary position, thus reducing fiscal risks’ the IMF said.