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International Monetary Fund Managing Director Kristalina Georgieva has scolded London for its plans for tax cuts, warning the finance minister and central bank chief that their policies must not be contradictory.
Kristalina Georgieva, the managing director of the International Monetary Fund, IMF, warned the UK authorities that fiscal policy should go hand in hand with monetary policy, responding to the “mini budget” carried out by the new government of Liz Truss .
“If fiscal policy undermines monetary policy, then the objective of monetary policy becomes more complicated,” the economist commented. Georgieva urged British authorities not to “prolong the suffering” and to let the data guide their decisions.
The UK Government announced on September 23 an ambitious “growth plan” to boost the economy and tackle the rise in the cost of living, especially in energy, with a huge tax cut, the largest in 50 years.
But the plan does not include details of how the debt would be wiped out, and it wreaked havoc on financial markets, sending the pound tumbling. The Tory leader has backed down on some measures and Kwasi Kwarteng, the finance minister, is due to give details of his full economic strategy on October 31.
The IMF chief recommended that any recalibration of policies must be guided by evidence. And right now, the evidence points to the need for governments to keep fighting inflation, even if doing so increases the risk of a global recession.
Georgieva commented that the probability of a global recession was now 25%, caused by the increase in inflationary pressures, the rise in interest rates and the increases in energy prices as a result of the war.
With EFE and Reuters
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