The United Kingdom proposed to slash taxes at a time of crushing inflation, a plan that has caused turbulence in financial markets.
The Bank of England calmed the panicked markets with an emergency intervention on Wednesday after the Prime Minister Liz Truss proposed a tax-cut plan has drawn criticism from economists and investors.
A Treasury Department official familiar with the matter told CNN Thursday that the Biden administration, including the Treasury Department, is concerned by the UK's tax-cut plan.
The United States is concerned that any problems on the other side of the Atlantic could spill over to the global financial system and the world economy.
US Commerce Secretary Gina Raimondo criticized Truss'plan Wednesday, pointing out that the British pound has plummeted since the proposal was unveiled.
In response to a question at the Brookings Institution, Raimondo said that the policy of cutting taxes and increasing spending isn't going to fight inflation in the short term or put you in good stead for long-term economic growth.
Raimondo tried to contrast the approach of the UK with that of the Biden administration.
She said that we are pursuing a different strategy: We are taking inflation seriously, letting the Federal Reserve do its job, watching deficit spending. Businesspeople want to see world leaders take inflation seriously. It is hard to see that coming out of this new government. Biden officials have expressed their concerns about the UK plan through the International Monetary Fund, according to Bloomberg News, which previously reported on the concerns of US officials.
The United States is the largest shareholder in the IMF, and has issued a rare criticism of the UK plan this week and urged the country s officials to reevaluate the tax cuts.
Given rising 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, an IMF spokeswoman said earlier this week.
Truss defended her tax plan, telling CNN spokesman Jake Tapper last week that her government is incentivizing businesses to invest and help ordinary people with their taxes.
Some US officials have been careful not to criticize their UK counterparts.
US Treasury Secretary Janet Yellen declined Tuesday to comment directly on the UK's economic plan, but she noted that the UK is dealing with significant inflation problems, just like the United States.
Asked if she is concerned about disorderly markets, Yellen said markets are functioning well and she hasn't seen liquidity problems emerge.
The large swings in bond and currency markets raise questions about how well markets are functioning.
A day after Yellen s comments, the Bank of England announced an emergency intervention. In order to prevent a bond market crash, the central bank promised to buy UK debt on whatever scale is necessary.