US treasury has 'close' eye on UK economy as 'tries to understand' Truss shake up

The US Treasury is keeping a “close” eye on the UK economy as the Chancellor, Kwasi Kwarteng, fends off concerns from the International Monetary Fund (IMF). US Treasury Secretary, Janet Yellen, said she was “watching UK developments closely” when asked her opinion on new economic policies announced by Downing Street.

The Treasury Secretary told CNBC she had met with Mr Kwarteng and expects “to meet with him again”.

The Chancellor has travelled to Washington for talks with the IMF in the wake of data being published suggesting the UK was heading for recession.

Mr Kwarteng has faced widespread criticism of his mini-Budget, including from the IMF.

It warned the £45m of unfunded tax cuts would “complicate the fight” against soaring prices.

But the body said it could have short-term benefits for growth, while warning UK consumers could wind up with higher prices for a longer period of time than neighbouring countries.

Secretary Yellen refused to comment more directly on UK Government policy, only adding: “I am going to try to understand what the impact of those policies and their rationale is.”

She commented that when “monetary policy is tightening, fiscal policy should have a stance that complements that that central banks play the lead, but fiscal policy should be complementary,” adding: “We’ve tried to do that in the United States.”

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The proposed alterations to dividend tax and corporation tax are under review, it was reported.

The measures in the mini-Budget unsettled the markets when they were announced last month, with No 10 and No 11 forced to defend the move against increasing Tory opposition.

The Chancellor has already reversed the removal of the highest 45 percent tax rate.

A No 10 spokesperson told Sky News on Thursday that there would be no further U-turns, adding: “Yes, as I said to a number of questions on this yesterday – and the position has not changed from what I set out to you all then.”

Foreign Secretary James Cleverly echoed this statement, saying on Thursday: “The package the chancellor put forward is pro-growth and is the right answer.”

Mr Kwarteng will deliver further details on Halloween, after bringing forward his address by three weeks.

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