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Former Treasury Secretary Lawrence H. Summers has expressed his delight at the International Monetary Fund urging the United Kingdom to re-evaluate its unprecedented tax cuts.
What Happened: Summers on Tuesday shared a Financial Times article that reported on the IMF’s recommendation against large and untargeted fiscal packages amid elevated inflation pressures in many countries, including the U.K.
“Glad to see the IMF recognizing the gravity of the British situation. While I agree with the Fund’s judgement on inequality of the tax cuts, the only thing that warrants their involvement is the macroeconomic imprudence,” Summers tweeted.
Glad to see the IMF recognizing the gravity of the British situation. While I agree with the Fund’s judgement on inequality of the tax cuts, the only thing that warrants their involvement is the macroeconomic imprudence.
https://t.co/cutg2n6Diu
— Lawrence H. Summers (@LHSummers) September 28, 2022
Last week, British Chancellor of the Exchequer Kwasi Kwarteng cut income tax and stamp duty on home purchases and did away with a planned hike in business taxes.
Why It Matters: Summers explained that a financial crisis in Britain will affect London’s viability as a global financial center. “So there is the risk of a vicious cycle where volatility hurts the fundamentals, which in turn raises volatility,” he tweeted.
On Inflation: Summers also questioned the central bank’s take on inflation saying the suggestions that seem to have emanated from the Bank of England that there is something anti-inflationary about unbounded energy subsidies are bizarre. “Subsidies affect whether energy is paid for directly or through taxes now and in the future, not its ultimate cost,” Summers said.
Price Action: The Invesco CurrencyShares British Pound Sterling Trust FXB has lost over 8% in one month.
Photo courtesy: International Monetary Fund on Flickr
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Image and article originally from www.benzinga.com. Read the original article here.