The economic adviser of the White House has criticized the economic policy of the United Kingdom, asking the government to maintain “fiscal discipline”.
Brian Deese seemed unsurprised by the market’s reaction to Friday’s mini-budget: “In a cycle of monetary tightening like this, the challenge with that policy is that it just puts the monetary authority in a potential position to move even tighter. I think this is what you saw as a reaction”.
He added: “It is particularly important to maintain a focus on fiscal prudence, fiscal discipline.”
Where is the pound now?
As James Sillars, business reporter
The pound is trading near $1.07 this morning – well above Monday morning’s record low of $1.03.
Its value was relatively steady at $1.08 for most of Tuesday.
This was supported by comments from the Bank of England’s chief economist that a “significant” interest rate rise was on the way in response to the market’s reaction to the government’s mini-budget delivery.
However, the fact that the International Monetary Fund – the world’s lender of last resort – has felt it necessary to rebuke the government has put further pressure on it.
Sterling is half a cent lower in Wednesday’s session so far – and slightly lower against the euro at almost €1.12.
It is very clear though that the strength of the dollar, a key feature of this year, is in play more broadly as the US currency is at odds with most international currencies.
This reflects the dollar’s status as the world’s reserve currency, investors’ lack of appetite for risky assets and further evidence that the US central bank has no plans to ease the pace of interest rate hikes.
The IMF, in a rare intervention, asks the chancellor to reverse the tax cuts
The International Monetary Fund (IMF) has asked the British chancellor to rethink tax cuts for the richest in a rare intervention in the economic policy of a major country.
Mr Kwarteng was forced to announce he will set out more fiscal details on November 23 after markets reacted disastrously to Friday’s mini-budget – which removed the top tax rate and came without analysis from the Accountability Office. The budget.
A spokesman for the international lender said Mr Kwarteng’s announcement in November would “present an early opportunity for the UK government to consider ways to provide support that is more targeted and to reassess tax measures, particularly those that benefit people with high incomes”.
The Washington-based organization was clear: “The nature of the UK’s measures is likely to increase inequality.”
The IMF said it was “closely monitoring” developments in the UK and was in contact with the authorities.
“Given the increased inflationary pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this time, as it is important that fiscal policy does not operate at cross-purposes with monetary policy “, said a spokesperson.
The IMF called on the government to consider more targeted support for households and business.
The government’s reaction to the IMF
A Treasury spokeswoman said: “We have acted swiftly to protect families and businesses this winter and next, following the unprecedented rise in energy prices caused by (Vladimir) Putin’s illegal actions in Ukraine.”
The government is “focused on growing the economy to raise living standards for all” and the chancellor’s statement on 23 November “will set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP (gross domestic product) in the medium term”.
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