IMF scolds U.K. on fiscal plan that has upset financial markets

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The International Monetary Fund warned on Tuesday that the U.K. government's fiscal plan could lead to worsening inequality and undermine monetary policy.

The International Monetary Fund is keeping a close eye on recent economic developments in the United Kingdom.

The fiscal package unveiled on Friday is intended to help families and businesses deal with an energy shock and boost growth through tax cuts and supply measures, according to the International Monetary Fund.

We don't recommend large and untargeted fiscal packages at this time as it is important that fiscal policy doesn't work at cross-purposes to monetary policy.

The nature of the U.K. measures will increase inequality, according to the International Monetary Fund.

The pound fell along with British government bonds as international markets reacted to the U.K. mini-budget presented on Friday, which included both tax cuts and billions of pounds in energy subsidies to help British families struggling to pay heating bills.

The pound fell to a record low against the U.S. dollar and the yield on the U.K. government bonds spiked.

The 10-year U.K. gilt yield spiked to 4% as investors bet on aggressive Bank of England action to tame tax cuts.

A collapse of the pound, a global reserve currency, could spark a global crisis and Lawrence Summers was surprised that the International Monetary Fund hadn't commented on the situation.

The so-called 1976 sterling crisis saw Britain devalue the pound and seek an International Monetary Fund loan.

The pound was down 1.2% for the week and 7.8% for the month.

The U.K.'s Nov. 23 budget will give the UK government an opportunity to consider ways to provide support that is more targeted and reexamined the tax measures that benefit high income earners, according to the International Monetary Fund.