Inflation to fall

Relief for Sunak as Moody’s raises outlook on UK

Rishi Sunak at Tory conference
Rishi Sunak is hoping for a sharp fall in inflation

Credit rating agency Moody’s has raised its outlook on the UK, saying that “policy predictability has been restored” following last year’s mini-Budget.

It also noted the UK’s “more conciliatory” approach to EU trade. S&P dropped its negative outlook in April.

The latest assessment of the UK’s ability to repay its debts is a vote of confidence in the underlying strength of the economy and a timely boost for Rishi Sunak’s government after its latest by-election defeats.

It comes amid expectations of a sharp fall in inflation this month as the effect of last year’s sharp energy price rises falls out of the calculation. Economists believe inflation could drop from 6.7% to as low as 4.9% in October, the lowest in two years.

Moody’s said it based its latest outlook decision on Chancellor Jeremy Hunt’s decision to reverse most of his predecessor’s tax cuts and on a better trading relations with the EU which can help ease Brexit-induced inflation.

It helps draw a line under the disastrous mini-Budget last autumn, which included £45bn of unfunded tax cuts, without forecasts from the government’s spending watchdog, the OBR.

The third rating agency, Fitch, still has a negative outlook on the UK and will publish its next assessment on 1 December.

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