This rating downgrade comes days after a similar decision by S&P agency in connection with the significant tax cuts announced by the UK government.
The rating agency Fitch downgraded the rating outlook for Great Britain on Wednesdaysteady” at “negative», a few days after a similar decision by the agency S&P in connection with the significant tax cuts announced by the British government on September 23. These measures to promote growthcould lead to a significant increase in budget deficits in the medium termFitch said in his statement.
The US agency maintained its UK government bond rating at AA-, one notch below S&P. However, the decline in the outlook signals the risk of a downgrade of this rating if the country’s economic situation does not improve. The budget packwithout countervailing measures or an independent assessment of their impact on public finances, and the mismatch between fiscal and monetary policies in the face of strong inflationary pressures has had negative consequences for consumer confidence, financial markets and the credibility of the policy framework, according to Fitch‘ the agency explains.
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A lack of encryption
Liz Truss, who arrived at Downing Street in early September, and her Chancellor of the Exchequer, Kwasi Kwarteng, announced a massive household energy supply plan on September 23, accompanied by huge tax cuts. The lack of figures on the size of the mega-budget package and any projections on the impact of this massive spending plan – with no planned spending cuts and debt financing at a time when inflation is soaring and interest rates are rising – has recently set financial markets on fire Week. The pound fell to its all-time low on September 26th.
The British leader and her minister initially defended their actions before finally announcing on Monday they were abandoning some of the most controversial measures, notably the abolition of the lower tax rate for upper-income groups. The UK government’s long-term borrowing rates have soared, making financing UK debt more expensive at a time when inflation is nearing 10%, the highest in the G7, and when London is looking to borrow much more.
All of the stimulus measures, ranging from subsidies for energy bills to sweeping tax cuts (social security contributions, corporate taxes, environmental taxes, etc.), are estimated by economists at between £100 billion and £200 billion, but have not yet been fully calculated by the government. On Friday, rating agency S&P lowered its forecast for the UK’s credit rating, and rival agency Moody’s had already warned Kwasi Kwarteng that his tax strategy was risky.permanently weaken the country’s ability to finance itself at affordable costs“. The International Monetary Fund intervened, urging strongly – and unusually – Downing Street to rectify the situation.