UK recession could be exacerbated by fiscal tightening

The U.K. government is set to release a detailed plan to restore the country's public finances.

Spending cuts and tax hikes are expected to be a major part of the program, scheduled to come out Thursday. Jeremy Hunt, Britain's Chancellor of the Exchequer, will announce new measures to combat the country's economic crisis. The plan is going to cost the government 50 billion pounds (59 billion U.S. dollars).

Currently, based on the GDP data released on Friday, there is a possibility of prolonged recession in the country. Experts say that the inflation figures for October, due to be released on Wednesday, are going to be the highest seen in a while. Thus, according to average forecasts, the consumer price level may reach 10.7%. 

The measures taken by Jeremy Hunt and Rishi Sunak will determine the UK's commitment to tackle the crisis.

Earlier, former British Finance Minister Kwasi Kwarteng, along with former Prime Minister Liz Truss, unveiled a plan to support the economy, involving large-scale tax cuts. However, this program provoked a storm of criticism and undermined confidence in the British financial system.

Therefore, a new government has been formed. Nowadays, the aim of the Conservative Party is to regain lost ground in a two-year period. The next election is scheduled for January 2025.  

Experts believe that the Bank of England will continue monetary tightening. There will be further interest rate hikes in the country in order to control over inflation. A statement on the planned course may be released on Wednesday, when the Governor of the Central Bank of Great Britain, Andrew Bailey, delivers a speech in Parliament.

According to Bloomberg Economics, the Bank of England is expected to tighten monetary policy until service sector inflation reaches the long-term average.