New York
CNN
–
US officials increasingly in trouble with UK proposed tax cuts at a time of inflation mitigation, a scheme that caused chaos in the financial markets.
British Prime Minister Liz Truss’ tax cut plan has drawn criticism from economists and investors. prompted the Bank of England to calm panicking markets with an urgent intervention on Wednesday.
The Biden administration, which includes the Treasury Department, is concerned about the UK’s tax cuts, an administration official familiar with the matter told CNN on Thursday.
The risk for the United States is that any trouble across the Atlantic could spill over into the global financial system and the world economy.
US Commerce Secretary Gina Raimondo criticized Truss’s plan on Wednesday, pointing out that sterling has “fallen sharply” since the proposal was published.
“The policy of cutting taxes and increasing spending at the same time, is not a policy that will fight inflation in the short term or help you benefit long-term economic growth,” Raimondo said in response to a question at an event. organized by the Hamilton Project at the Brookings Institution.
Raimondo sought to contrast the UK’s approach with that of the Biden administration.
“We’re pursuing a different strategy… We’re taking inflation seriously, letting the Federal Reserve do its job, tracking deficit spending,” she said. “Investors, traders want to see world leaders take inflation very seriously. And it’s hard to see that in this new government.”
According to Bloomberg News, Biden officials have communicated their concerns about the UK’s plan through the International Monetary Fund.
The United States, the largest shareholder in the IMF, issued a rare criticism of the UK’s plan this week and called on officials to “reassess” the tax cuts.
“Due to mounting inflationary pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this time, as it is important that fiscal policy does not operate with a cross-purpose for monetary policy,” an IMF spokesman said earlier this week.
Truss defended her tax plan, telling CNN’s Jake Tapper last week that her government is encouraging businesses to invest and helping ordinary people with their taxes.
Some US officials have been careful not to directly criticize their UK counterparts.
US Treasury Secretary Janet Yellen on Tuesday declined to comment directly on the UK’s economic plan, although she noted that the UK was dealing with “significant inflationary issues”. – same as the United States.
When asked if she is worried about the market disorder, Yellen said “the market is doing well” and she has not seen a liquidity problem.
But big change in relationship and the money market raises questions about how well the market is doing.
A day after Yellen’s comments, the Bank of England announced an emergency intervention. Central bank promised to buy British government debt “Whatever scale is necessary” to prevent a bond market crash and alleviate “dysfunction” in financial markets.
