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 Malaysian cyclist could face disciplinary action after 'Save Gaza' gloves protest
- 2 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 3 Fifty Shades of Grey trailer provokes moral outrage from US parenting groups
- 4 McDonald’s removes chicken nuggets from the menu in Hong Kong amid major food scare
- 5 Students offered grants if they tweet pro-Israeli propaganda
Israel-Gaza conflict: Israeli targeting policy under scrutiny after shellfire hits a mother and child, a school full of refugees and a doctor’s home
Students offered grants if they tweet pro-Israeli propaganda
McDonald’s removes chicken nuggets from the menu in Hong Kong amid major food scare
Satellite full of sexually experimental geckos adrift in space, Russia loses control of mission
Costa Concordia finally towed from Giglio amid environmental concerns that cruise liner is a 'floating bomb'
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
iJobs Money & Business
£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...