Washington  - Britain is in for an "extended period" of high inflation and lower growth that will test the government's policy of fiscal restraint, the International Monetary Fund said Wednesday.

The IMF also warned the Bank of England against further interest rate cuts ahead of its meeting Thursday. Rising food and fuel prices would keep inflation above the government's target of 2 per cent, providing "little scope for monetary easing" despite sluggish growth.

Britain's strong economic performance and sound fiscal policy of the past decade were being tested by "several concomitant shocks," the IMF said in an annual staff report.

In addition to higher costs, Britain's economy has felt the effects of a housing and financial crisis that began in the United States.

The IMF also said Britain was likely to breach its net public debt "ceiling" of 40 per cent of gross domestic product, and urged the government to do everything in its power to bring the debt levels back down.

Headline inflation stood at 3.8 per cent in June. The IMF has predicted economic growth of 1.4 per cent for 2008 and 1.1 per cent in 2009. (dpa)