As the UK counts down to a new budget from Chancellor of the Exchequer Jeremy Hunt, Bank of England (BOE) chief economist Huw Pill has warned of the risks facing the country.
Following expectations that Hunt will impose large tax increases and spending cuts, Britain is feared to be facing a deeper economic slowdown.
Huw Pill said Hunt's move could weigh more on the UK economy than the central bank had previously anticipated.
He also did not rule out the possibility that the economy will slow down if higher interest rates are implemented along with tax increases and spending cuts by the government.
He added that the central bank will take into account the long-awaited debt reduction plan when the BOE sets interest rates in December.
If the budget presented by Hunt is larger than expected, Pill said the central bank will likely implement a slightly lower rate hike.
He said, a large tax increase could slow down spending in the economy more than expected and thus could have an impact on inflation.
It is understood that the Finance Minister is preparing to announce tax increases and spending cuts totaling £60 billion on November 17.
