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re: LIZ TRUSS CHAOS: HOME SECRETARY QUITS Chief Whip & Deputy Resign
Liz Truss Under Pressure From IMF to Rethink Tax Cuts - Bank of England REFUSES Any More Bail-Outs
----British PM Liz Truss's high-stakes gamble with the UK economy is already unravelling
UK Chancellor Summoned to IMF Yesterday - IMF REFUSES Emergency Funds
----International Monetary Fund urges UK chancellor Kwasi Kwarteng to change course
Concern about TRUSSonomics at IMF: British economic policy faced some thinly-veiled criticism by other G7 finance ministers at the crucial meeting of major economies at the IMF yesterday, the BBC understands.
The government may have to rethink its tax-cutting plans to reassure financial markets and stabilise the economy, some senior Conservative MPs have said.
BBC News 13 Oct 2022
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UK Chancellor Kwasi Kwarteng has been urged to change course after his mini-budget spooked financial markets with its package of tax cuts and increased borrowing.
In an extraordinary statement, the International Monetary Fund said it was “closely monitoring” developments and urged the chancellor to “re-evaluate the tax measures”.
It said the current plans, including the abolition of the 45p ($0.47) rate of income tax for people on more than £150,000 ($159,800), are likely to increase inequality.
The pound dipped 0.95 per cent overnight against the dollar to $1.06, reversing a marginal 0.4 per cent gain it made on Tuesday.
Speaking on BBC Radio 4's Today programme on Wednesday, Adnan Mazarei, a former deputy director for the IMF, said the fund usually reserves such criticism for “emerging market countries with problematic policies … not often about G7 countries”, which are the seven richest nations in the world.
He said there was a fear the tax cuts are permanent.
White House economic adviser, Brian Deese said he was not surprised by the markets’ negative reaction to the tax-cutting mini-budget, adding it was important to focus on "fiscal prudence, fiscal discipline".
He said introducing tax cuts at a time of monetary tightening, when interest rates were being raised, means monetary policy may have to be tightened even further.
Labour Party leader Sir Keir Starmer said the criticism of the UK government's plan for tax cuts was "very serious".
"This was a step they didn't have to take," he told LBC radio.
"Quite often when the markets are jittery, when the pound falls, it's because of some international event — conflict in Ukraine, a cost-of-living crisis, energy crisis. This is self-inflicted by the government."
He said people were "very, very worried this morning".
"Their mortgages are going up. Some people who thought they had a mortgage arrangement last week now haven't got one."
The intervention came as the Bank of England signalled it was ready to ramp up interest rates to shore up the pound and guard against increased inflation.
The chancellor insisted he was “confident” his tax-cutting strategy would deliver the promised economic growth.
After a day of turmoil in the markets on Monday, during which sterling slumped to a record low against the dollar, the chancellor sought to reassure City investors that he has a “credible plan” to start reducing the UK’s debt mountain.
But the IMF said: “We understand that the sizeable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.
“However, 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.
“Furthermore, the nature of the UK measures will likely increase inequality.”
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The International Monetary Fund says tax-cutting plans are likely to increase inequality in the UK.
Veiled Concern About Trussonomics at IMF
While the UK was not identified by name, multiple participants at the round table, the debut of UK Chancellor Kwasi Kwarteng, raised their concerns about countries making unfunded tax cuts that threatened financial stability, at a delicate time, a clear reference to Britain.
One G7 minister said privately that the concern was really about how the UK had "doubled down" even after the clear financial stability implication, and that explanations would be sought.
The US Treasury Secretary Janet Yellen had already said publicly on the sidelines of the IMF conference that she was "watching UK developments closely".
While she didn't want to comment on UK policy, she said: "I am going to try to understand what the impact of those policies and their rationale is."
Secretary Yellen, a former Federal Reserve Chair told CNBC when asked if UK fiscal credibility problems were making global markets more volatile said "at a time when monetary policy is tightening, fiscal policy should have a stance that complements that that central banks play the lead, but fiscal policy should be complementary. We've tried to do that in the United States."
The President of the Eurogroup, which represents the Eurozone, the Irish Finance minister Paschal Donohoe, told the BBC: "The United Kingdom is a G7 economy with their own currency.
"And it's absolutely obvious in all of the public statements that have been made by the Bank of England and by the government of the United Kingdom, that they're aware of developments that are taking place and have every confidence in their ability to be able to manage these kinds of developments."
But he stressed that Ireland had taken a "different approach" by deciding "not to borrow" to fund energy crisis help, because he wanted to make sure it was affordable and "the need to ensure financial market confidence".
The former Bank of England Governor Mark Carney, when asked about the message being sent by markets to the UK, said, "whether it's in monetary policy or fiscal policy, or climate policy, credibility comes from commitment, clear commitment, it comes from transparency, and it's buttressed by institutions".
Mr Carney said he had "full confidence in the Bank of England" to get inflation back down and to safeguard the financial system and "as a consequence of both of those markets, will settle and they will price risk accordingly. And I'm sure the government is aware of that seized of that and working to ensure that it has the right budget policy".
'Everybody's Had Enough':
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