West News Wire: International Monetary Fund (IMF) specialists have cautioned that the tax cuts proposed by the UK government last week should be reevaluated since they offer the Bank of England poor prospects in the face of high inflation.
The Washington-based organization claims that the cuts, which caused the pound sterling to drop to an all-time low of $1.03 on Monday, will probably lead to more inequality.
A representative for the IMF stated on Tuesday that “given the rising inflation pressures in many countries, including the UK, we do not suggest big and untargeted fiscal packages at this juncture, since it is crucial that fiscal policy does not function in opposition to monetary policy.” Additionally, it is likely that the nature of the UK initiatives will result in greater inequality.
Meanwhile, Moody’s Investors Service has predicted that the controversial step will lower economic growth by pushing up interest rates. This outlook contradicts the opinion of newly appointed finance minister, Kwasi Kwarteng.
According to the agency, large unfunded tax cuts are “credit negative,” boosting the prospect of Britain’s rating being downgraded.
The IMF said the budget that Kwarteng is due to present on November 23 would provide an “early opportunity for the UK government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners.”
Earlier this week, Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, said “the proposal has really increased uncertainty and really caused people to question what the trajectory of the economy is going to be.”