The Chief Secretary to the Treasury says today's IMF report on the British economy is "extremely good news" and a "strong endorsement" of the Government's strategy.
However, Danny Alexander acknowledged that ministers have to "keep a close eye" on the housing market to defuse any risks.
The head of the IMF has given a ringing endorsement of the UK's recent economic progress, saying the news has been "pretty much all good".
At the same time, Christine Lagarde warned of "risks looming on the horizon" from weak productivity and an overheating housing market.
The head of the IMF has suggested the Bank of England should increase interest rates, as keeping them at their low 0.5% rate could "increase risks to financial stability".
Christine Lagarde said the IMF view was that having low interest rates "could further fuel house prices" and therefore risk destabilising the economy.
She said it was up to the Bank of England to take action on rates "in a gradual fashion as the first line of defence against risks to financial stability arising from the housing market".
The head of the IMF has called for the Government to put in place more measures to boost housebuilding.
Speaking at the Treasury this morning as the IMF gives its yearly assessment of the British economy, Christine Lagarde said:
"Addressing imbalances in the housing market...will require further measures to increase the availability of land for development and to remove unnecessary constraints to land use.
The head of the IMF, Christine Lagarde, has dismissed suggestions that she is in line for a new role as President of the European Commission, the EU's executive body.
ITV News Economics Editor Richard Edgar is at a press conference with Ms Lagarde at the Treasury.
"I'm not a candidate" for the commission presidency job says Lagarde
The head of the International Monetary Fund has welcomed the UK's economic progress over the last year but warned of major risks that remain.
Delivering the IMF's annual report on the state of the British economy, Christine Lagarde said that "the news coming out of the UK has been pretty much all good".
She pointed to the UK's growth rate being the highest of the advanced economies, along with signs that the economy is "rebalancing" towards a more investment-driven economy.
However, she also identified two major risks to Britain's prosperity - weak productivity and the the rapid rise of house prices.
"There is no room for complacency as there are risks looming on the horizon," Ms Lagarde said.
George Osborne says the International Monetary Fund will today show support for the Government's "long-term economic plan".
The Chancellor said he would "wait and see" what IMF chief Christine Lagarde would say about the British housing market when she speaks at the Treasury later.
But he argued he had created the right mechanisms to defuse the kid of risks in the housing market that have caused problems in the past.
US Secretary of the Treasury Jack Lew met Ukrainian Prime Minister Arseniy Yatsenyuk today:
Sec Lew met w Ukrainian PM today to discuss US assistance package, IMF program, efforts to implement economic reforms http://t.co/RGNCnYhLBk
Sec Lew & Ukrainian PM agreed that securing passage of IMF quota legislation is needed to maximize int'l community’s support to Ukraine
Ukraine has requested support from the International Monetary Fund, its Managing Director Christine Lagarde has confirmed.
Lagarde said the IMF is discussing with international partners how best to help Ukraine, and will send a team to Kiev in the coming days.
Ukrainian finance minister Oleksander Shlapak said they are asking for at least $15 billion.
"Today we requested the IMF send a mission and we hope that it will be here next week," the minister was quoted as saying by Interfax news agency.
Chancellor George Osborne has welcomed the IMF's upgrading of Britain's economic growth forecast, adding the coalition's plan is delivering "economic security for the hard working people of this country".
He said: "We've had two pieces of good news today, first that the IMF have upgraded the British growth forecast by more than any other country and also good numbers in manufacturing."
He added: "I think that shows there is clear evidence that by working through our plan, by avoiding the quick fixes and easy options we're delivering economic security for the hard working people of this country."