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IMF chief warns UK officials over fiscal, monetary policy coherence

David Lauder

WASHINGTON (Reuters) – International Monetary Fund chief Kristalina Georgieva rebuked Britain on Thursday planned tax cuts and told its finance ministers and central bankers that their policies should be

Her comments at the annual meetings of the International Monetary Fund and World Bank in Washington underscored concerns about the UK​​​ Fears of financial market turmoil sparked by a proposed “mini-budget” of increased spending and tax cuts by the U.S. overshadowed larger economic challenges, such as fighting inflation and the fallout of the war in Ukraine.

Georgieva told a news conference that she had discussions with UK Finance Minister Kvassey Kwarten and Bank of England Governor Andrew Bailey that needed “policy Coherence and clear communication…so in this tense environment there is no reason for more tension.”

“We’re here to convey to everyone Information, not just for UK time: the fiscal policy event will not derail monetary policy, because if it does, the task of monetary policy will only become more difficult and translate into the need to further raise interest rates and tighten financial conditions,” Georgieva said. “So don’t prolong the pain.”

The IMF chief said any policy adjustments should be evidence-led. And now, evidence suggests that governments need to continue fighting inflation, even as doing so increases the risk of a global recession.

Avoid the spotlight

Kwarteng keeps a low profile at the first face-to-face meeting of the IMF and World Bank in more than three years and does not attend G20 Finance ministers and central bank governors meet on Thursday, according to UK media reports.

In a BBC TV interview on the sidelines of the meeting, Kwarteng said he was focused on achieving a small budget and economic growth amid media reports that the UK government had said. Some plans are under consideration.

“Our position has not changed. I will present the medium-term fiscal plan in October 31 as I said earlier this week, and then there will be more Lots of details,” Kwarteng told the BBC. Announcing the tax rate – rather than letting it increase as planned by his predecessor Rishi Sunak – Kwarteng reiterated his focus on his growth plans and added that he wants to stay on as finance minister.

But Georgieva said the Bank of England’s decision to intervene in sovereign debt markets was “appropriate” to preserve financial stability and not interfere with the bank’s main monetary policy objective, namely prices Stablize.

Georgieva said the global recession is now around 25% due to rising inflationary pressures, rising interest rates and soaring energy and food prices due to war , the International Monetary Fund’s forecast fell.

Her remarks came as new U.S. data showed consumer price inflation rose 0.4% in September to a stronger-than-expected 8.2% y/y, reinforcing expectations that the Federal Reserve will raise interest rates by a quarter Three expectations. One percentage point next month.

Georgieva said the IMF was still urging central banks to continue tightening monetary policy “because inflation has been fairly stubborn and the risk of inflation expectations de-anchoring is even more pronounced.”

“We cannot allow inflation to become a runaway train,” Georgieva added. Control prices, as this will cool demand and lower prices for energy, food and other commodities, “whether or not the war continues.”

But she said more research is needed to understand the impact of supply chain restructuring and the impact of geopolitical fragmentation in the global economy on long-term price movements.



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