Pound slumps against US dollar after IMF urges chancellor Kwasi Kwarteng to reconsider tax cuts

The pound has slumped again after the International Monetary Fund (IMF) urged the chancellor to “re-evaluate” the tax measures he put in place.

On Wednesday, the pound suffered further falls after the UK Government was heavily criticised by the IMF over its handling of economic policy.

Sterling fell back to 1.06 US dollars after reaching 1.08 US dollars on Tuesday.

The pound plunged to its all-time low against the dollar on Monday – at 1.03 – and there are fears it could head towards parity with the greenback unless the UK government can ease financial market fears over its plans to slash taxes.

In a statement released on Tuesday, the IMF – an international body with 190 member countries that works to monitor and support the economy – warned against chancellor Kwasi Kwarteng’s plans for a £45bn tax cut funded by government borrowing.

The organisation also warned that the measures would likely “increase inequality”.

Kwarteng has insisted he is “confident” that his tax-cutting strategy will deliver the promised economic growth.

“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,” said the IMF.

“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.

“Furthermore, the nature of the UK measures will likely increase inequality.”

A medium-term fiscal plan will be set out by the chancellor on November 23, accompanied by an Office for Budget Responsibility forecast.

The IMF suggested that Kwarteng should use that time to reassess the plans.

The chancellor is set to meet investment banks on Wednesday in efforts to reassure the city of his plans following days of economic turmoil in the wake of his mini-budget announcement.