The International Monetary Fund (IMF) said British hopes for an export-led economic recovery are being hit as "declining productivity growth and high unit labour costs are holding back much needed external rebalancing".
The IMF suggested alternatives policy responses as it slashed the UK's growth forecasts for this year and the next.
Its report stated:
In the United Kingdom, other forms of monetary easing could be considered, including the purchase of private sector assets and greater transparency on the likely future monetary stance.
Greater near-term flexibility in the path of fiscal adjustment should be considered in the light of lacklustre private demand.
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