Moody’s Revises UK Outlook to ‘Stable’ on Restored Policy Predictability

Moody’s Boosts UK Outlook

Ratings agency Moody’s has upgraded Britain’s outlook from “negative” to “stable,” citing restored policy predictability. This comes after a period of heightened volatility surrounding the “mini-budget” implemented by former Prime Minister Liz Truss.

Restored Confidence in Policy Predictability

Moody’s decision to revise the outlook is based on the restoration of policy predictability under the leadership of Prime Minister Rishi Sunak. Sunak has reversed Truss’s policy decisions and pledged to stabilize the economy while rectifying past mistakes.

Gradual Fiscal Tightening Expected

While Moody’s acknowledges the risks posed by structural spending pressures and high inflation, it still expects the government to gradually tighten fiscal policy in the coming years. This is in line with Sunak’s commitment to restoring economic stability.

Challenges Ahead

Britain currently faces challenges such as high inflation, with the highest rate among major advanced economies, and a forecasted weak economic growth of just 0.5% next year according to the International Monetary Fund. However, the government’s borrowing has been lower than expected, with higher tax revenue due to inflation and pay growth.

The Impact of Borrowing Costs

Finance Minister Jeremy Hunt has expressed concern about rising borrowing costs and their impact on the country’s debt servicing. He described the increase in borrowing costs as “clearly not sustainable.” Hunt is scheduled to provide a fiscal update on November 22.

Positive Outlook Confirmed

Standard and Poor’s has also affirmed its AA rating and stable outlook for Britain, reinforcing the positive sentiment towards the country’s economic prospects.

With policy predictability restored, Moody’s revised outlook reflects the confidence in the UK’s economic stability under Prime Minister Rishi Sunak. Despite challenges such as high inflation, the government’s commitment to gradually tighten fiscal policy is expected to address these concerns. As the fiscal update approaches, all eyes will be on the government’s plan to navigate the borrowing costs and sustain economic growth.