Lagarde was in London for the IMF's annual "Article IV," effectively a health-check on the UK's economy.
While the U.K.'s economic growth has been better than many, including the IMF, expected, the performance of exports means it is not quite firing on all cylinders, according to Lagarde.
She also warned about the dangers of an over-inflated housing market.
The U.K.'s economy has broadly "rebounded strongly" the IMF said in a statement.
The IMF's comments will add to growing concerns of a bubble in the country's housing market, particularly in London and the South-East.
Chancellor of the Exchequer George Osborne acknowledged the problem, and said the government is trying to free up the planning process to allow more houses to be built.
The Bank of England should keep monetary policy on hold for the moment, the fund said.
The Bank should raise interest rates before reducing its quantitative easing program, the fund advised.
Osborne said he was very aware of the "risks" to U.K. growth and agreed unemployment was not falling quickly enough.
"We need to remain vigilant for any risks that may remain in the housing market," he said.
Lagarde also highlighted the need for "strengthened, independent, and well-researched supervision," in financial services, and expressed her frustration at the pace of international reform.
London's regulatory regime has been criticized after both the Libor and foreign exchange market scandals.
Lagarde dodged questions about whether her next step would be becoming president of the European Commission. The race for the job has become embroiled in controversy after the U.K. tried to block leading candidate Jean-Claude Juncker.
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"I'm not a candidate. The reason I'm not is that I have a job and it's a job I happen to think is rather important at the moment," she said.
Lagarde also warned that there is an ongoing "global underpricing of risk."
—By CNBC's Catherine Boyle