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 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
- 5 Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
Jihadi John': MI5 may have identified Isis militant who killed David Haines but options limited
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: Police will be on high alert on Friday whatever the result
David Haines beheading: David Cameron says Britain will hunt down Isis 'monsters' shown in video murdering aid worker
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...