Moody's says Britain's AAA credit rating is safe – for now
Tuesday 16 March 2010
As he completes preparations for what could be one of the toughest Budgets in years, Alistair Darling has been treated to an unfamiliar chorus of encouraging news from the credit ratings agency Moody's, Bank of England policy maker Kate Barker and the gilts market.
Gilts rallied on Moody's latest credit ratings update, which suggested that, even on an "adverse" assessment of the nation's prospects, a downgrade of the current cherished AAA rating seems unlikely, and even if it did transpire it would not be until 2013.
Moody's called for "additional efforts" in the Budget to tackle the deficit that "would not be out of line with historical precedents and would be politically feasible, in a context where the public support to fiscal consolidation remains strong in our view".
However, failing such efforts, Moody's warns that "a rise in gilt yields may – despite the long average life to maturity of public debt in the UK – quickly stretch debt affordability to a level that, if it were maintained over time, would not be consistent with an AAA rating".
But the relatively upbeat tone of the Moody's report saw gilts rally, outperforming German Bunds. "The UK is still a long way away from anything that would prompt a ratings outlook change" Moody's senior vice president, Kristin Lindow, told Reuters. Such comments will help the Chancellor defuse claims by his political opponents that a loss of the AAA rating is imminent.
Kate Barker, the longest serving independent member of the Bank of England's Monetary Policy Committee, added that she thought a full blown "double-dip" recession was unlikely. She said: "It's possible we will have a quarter when GDP falls, but I don't think it will be a double-dip. I would be surprised if we go back to recession but I think recovery will be bumpy and fragile."
Moody's added that: "The risk of a double-dip recession seems low, although the risk remains that growth continues to be modest for some extended time.
"A muted pace of recovery creates downward risk for debt affordability."
- 1 King Salman: Just five days in, Saudi Arabia's new king has already overseen a beheading
- 2 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 3 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 4 Presidential optical illusion offers clues to how brain processes faces
King Salman: Just five days in, Saudi Arabia's new king has already overseen a beheading
Auschwitz liberation 70th anniversary: Woman sent to three Nazi death camps describes surviving gas chamber
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Ukip Jelly Babies cause uproar on Amazon
Chilling drone footage captures Auschwitz ahead of 70th anniversary of liberation
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...