Sterling: Pound plummets over fears UK could lose triple-A credit rating

9th June 2011

A report in the Daily Telegraph quotes Sarah Carlson, an analyst at Moody's Investors Service, sayint the UK could lose its prized "Aaa" rating under current conditions.

"Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the UK's sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation efforts could cause the UK's debt metrics to deteriorate to a point that would be inconsistent with a Aaa rating," she said.

The Guardian adds: "Some City traders argued that Carlson's comments simply underlined the stance on the UK outlined by the ratings agency in March. Economists suggested that they may even encourage the chancellor, George Osborne, not to change his economic programme, as a slower cuts programme could cause the "fiscal slippage" that concerns Moody's."

After Carlson's comments were published, Moody's confirmed to reporters that its position had not changed.

"Moody's rates the UK at AAA, with a stable outlook," a spokesman for the ratings agency told reporters. "However, as we have been saying for a while now, slower growth combined with weaker-than-expected fiscal consolidation efforts could cause us to reconsider our stance."

A lower credit rating tends to make borrowing more expensive for a country, which in turn makes improving its public finances more difficult.

Ibt comments on the report in the Daily Telegraph: "Unfortunately, ratings (though largely meaningless) are used by lots of financial institutions.

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