The new economic measures put in place by the British government “will probably increase inequality”, according to a spokesman for the International Monetary Fund.
Yuri Gripas | Reuters
LONDON — New economic measures put in place by the UK government “will likely increase inequality”, the International Monetary Fund said in a rare statement.
While the tax package – which included Heavy tax cuts for the UK’s highest earners — aims to help families and businesses manage the energy shockthe IMF does not “recommend large, untargeted fiscal programs at this stage,” a spokesperson said in a statement late Tuesday.
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Friday’s so-called ‘mini-budget’ was not accompanied by a forecast from Britain’s independent Office for Budget Responsibility, which typically analyzes the impact major financial moves are likely to have on the economy.
The markets were strongly affected by the new measures, with UK bonds sink and the pound sterling drop to record low In Monday.
The IMF has also anticipated the next full budget announcement, due to be presented by Finance Minister Kwasi Kwarteng on November 23, saying it gives the UK government “an early opportunity … to consider ways to provide more support. targeted and more effective”. -evaluate tax measures, particularly those that benefit high incomes. »
“Big unfunded cuts are bad for credit”
The Bank of England is likely to make a “significant policy response” following Kwarteng’s budget announcement, according to its chief economist Huw Pill, who spoke at the Barclays-CEPR International Monetary Policy Forum on Tuesday. London.
Although no decision will be made before the bank’s next scheduled meeting in November, the recent announcements “will act as a stimulus”, Pill said, as reported by Reuters.
Ratings agency Moody’s, meanwhile, said “large unfunded cuts are negative for credit”, raising fears of larger budget deficits and higher interest rates in the UK.
“A sustained shock to confidence stemming from market concerns about the credibility of the government’s fiscal strategy, which has led to structurally higher funding costs, could more permanently weaken UK debt affordability” , Moody’s said, according to Reuters.
The ‘mini-budget’ announced by the new UK government on Friday was a ‘new approach for a new era of growth’, according to Kwarteng, and included the cancellation of the planned 19 % to 25% and the removal of the 45% income tax bracket paid on income over £150,000 ($160,000), bringing the top rate down to 40%.
The book has seen some recovery from its record low of $1.0382 at the start of the week, and sitting at around $1.0666 Wednesday morning.