In an unusually outspoken statement, the International Monetary Fund (IMF) openly criticized the UK government’s latest tax plan, stating the proposal by Liz Truss’s government was likely to add to inequality and soaring inflation.
Chancellor of the Exchequer Kwasi Kwarteng unveiled the country’s biggest tax package in 50 years last week. However, the roughly $45 billion tax cut package has stoked concerns that government borrowing could surge along with inflation and interest rates.
In a statement, the IMF said, “given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy.”
The Bank of England (BoE) has been raising interest rates to combat inflation which is at a 40-year high in the U.K. The collapse of the British pound has been accompanied by big moves in U.K. borrowing costs. The Bank of England announced an emergency intervention yesterday pointing to recent “dysfunction.” It said it would buy long-dated U.K. government bonds on “whatever scale is necessary” to “restore orderly market conditions.”