The
British pound fell against the dollar again Wednesday after the International Monetary Fund warned that the UK government's tax-cutting plans could derail the Bank of England's efforts to cool inflation.
In a rare intervention Tuesday, the global financial institution sharply criticised the
planned debt-financed tax cuts, worth 45 billion pounds ($48 billion). It said it was closely monitoring economic developments in the UK and was engaging with authorities.
Meanwhile, global ratings agency Moody's warned Tuesday the largely unfunded tax cuts were "credit negative", and could lead to higher interest rates and larger budget deficits,
Reuters reported.
Sterling dropped as much as 0.93% to $1.0633 in early trading and was down 0.71% at $1.0658 at last check.
"We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures," the IMF said in its statement.
"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," it said.
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