Inflation to fall
Relief for Sunak as Moody’s raises outlook on UK
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.