Economy risks boiling over, IMF warns Brown

The world's top financial authority said last night that the Bank of England will need to raise interest rates again this year to prevent the British economy overheating.

The International Monetary Fund also urged Gordon Brown to keep a tight rein on the public finances to prevent borrowing costs rising too much. "Some directors went further to suggest that a strengthening of the real exchange rate would warant a discretionary tightening of fical policy," said the IMF's executive board.

The conclusions were published for the first time by the British government late last night. They will put pressure on the chancellor to cut public spending or raise taxes - the former would infuriate the unions and the latter would enrage "middle England".