IMF criticizes UK policy, Bank of England to make big response

The International Monetary Fund (IMF) openly criticized Britain's new economic strategy on Tuesday, following another slide in bond markets that forced the Bank of England (BOE) to promise a "significant" response to stabilize the economy, reported Reuters.

Key quotes

The IMF said the proposals, which sent the pound to touch an all-time low of $1.0327 on Monday, would likely increase inequality and it questioned the wisdom of such policies.

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.

We are closely monitoring recent economic developments in the UK and are engaged with the authorities.

The Fund said a budget due from Kwarteng on Nov. 23 would provide an ‘Early opportunity for the UK government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners.’

FX implications

The news increases the market’s fears of recession, especially in the UK and weighs on the GBP/USD prices. That said, the quote remains pressured around 1.0720 by the press time of early Wednesday morning in Asia.