Record world oil prices drove UK fuel prices sharply higher this year

The IMF also forecast economic growth would pick up in 2006 and 2007 - to 2.25% and 2.75% respectively - as the UK shook off the current "soft patch".

"Macroeconomic stability in the UK remains remarkable," its report said.

But, it did warn that the Chancellor needs to rein in spending to stop budget deficits widening further.

The Article IV report also questioned Gordon Brown's decision to restate the current economic cycle.

'Precision needed'

"Fiscal rules are playing an important role in disciplining fiscal policy, although at times this role is overshadowed by peripheral controversies," the report said.

It added that Mr Brown's success in sticking to his golden rule - of borrowing only to invest during the economic cycle - depended on "a precise dating" of the cycle.

"The adjustments in the definition of the cycle have proved an unhelpful distraction from the more important considerations of what a sustainable fiscal policy is," the IMF said.

In July, Mr Brown declared the current economic cycle began in 1997 rather than 1999 - a move some experts said was effectively moving the goalposts for his own rules.

They swooped on the change, accusing Mr Brown of "cheating" to avoid breaching another strand of the golden rule, namely on balancing the budget over the economic cycle.