Kwarteng under fire from IMF for ‘making jobs harder’

Kwasi Kwarteng admits Mini-Budget caused 'a little turbulence'

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The International Monetary Fund (IMF) has criticised Chancellor Kwasi Kwarteng, for making “monetary policymakers’ jobs harder”. Mr Kwarteng came under fire from The International Monetary Fund earlier today, after the organisation said it made the battle against inflation harder. In its World Economic Outlook, the IMF said: “The fiscal package is expected to lift growth somewhat above the forecast in the near term, while complicating the fight against inflation.”

It added: “In the United Kingdom, the announcement in September of large debt-financed fiscal loosening, including tax cuts and measures to deal with the high energy prices, was associated with a rise in gilt yields and a sharp currency depreciation that was later reversed.”

Hitting out at the policy, the IMF’s report continued: “Without fiscal contraction elsewhere, and with tight supply, unfunded government spending increases or tax cuts will only push inflation up further and make monetary policymakers’ jobs harder.”

More generally, the organisation predicted that next year would be tough for many people.

It warned that the “worst” of the cost of living crisis is “yet to come”, saying that next year will “feel like a recession”.

The IMF’s criticism comes after the Government announced a swathe of tax cuts at the mini-budget in September, including cutting the basic rate of income tax from 20 to 19 percent and abolishing the 45 percent top rate of tax.

The planned corporation tax increase, which was set to rise from 19 percent to 25 percent, will also be axed.

Meanwhile, stamp duty will be cut for homebuyers.

In the wake of the announcement, the pound fell to a record low against the dollar. The following Monday, borrowing costs reached their highest levels since August 2008.

The Bank of England was then forced to intervene over a “material risk” to the UK economy, announcing it will start buying bonds in order to stabilise what it described as “dysfunctional markets”.

This came amid growing fears of a run on pension funds, similar to that seen by Northern Rock customers at the start of the financial crisis.

Earlier this week, the BoE announced it will ramp up its market intervention before the bond buying scheme closes on Friday.

The BoE said it is prepared to double the size of its daily purchases of gilts from a maximum of £5billion to £10billion a day ahead of Friday’s deadline.

There have been concerns that market volatility will return once the scheme ends.

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Earlier this week, Scottish First Minister Nicola Sturgeon said Liz Truss’ premiership has been “utterly catastrophic” for the UK economy.

She told Sky News: “The decisions she’s taken in the first few weeks of her tenure as Prime Minister have been utterly catastrophic to the economy and to people across the country who are paying the price of her decisions in higher mortgage rates and borrowing costs.

“She hasn’t had a grip on government since she became Prime Minister.

“What’s happened in the mortgage market is pension funds came to the brink of collapse because of her lack of a grip.”

Responding to Ms Sturgeon’s comments, a UK Government spokesperson said: “The Prime Minister has made clear the UK government’s priority is to deliver economic growth across the Union and to work together on shared issues including energy security.

“UK government ministers, including the minister for intergovernmental relations, along with officials, are continuing to engage regularly with their devolved counterparts.”

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