UK rating outlook downgraded to negative by Moody’s – POLITICO

The UK government’s rating outlook has been downgraded from ‘stable’ to ‘negative’ by Moody’s, the rating agency said on Friday evening, citing ‘the heightened unpredictability of policy-making in an unstable domestic political landscape’ .

Moody’s announcement comes after a dramatic week in the UK that saw Liz Truss resign as Prime Minister on Thursday. The agency joins S&P and Fitch in previously downgrading the country’s outlook to negative.

« The primary driver of the change in outlook to negative is the heightened risk to the UK’s credit profile due to increased unpredictability of policy-making in a volatile domestic political landscape, which calls into question the ability of the UK to manage the shock resulting from weaker growth prospects and high inflation, » Moody’s said.

« The evolution of policymaking and the UK government’s ability to instill confidence in its commitment to fiscal prudence will be an important consideration » as Moody’s assesses its rating, the agency said. Moody’s confirmed the country’s credit rating at Aa3.

Moody’s said maintaining the rating « reflects the UK’s economic resilience underpinned by its rich, competitive and diverse economy. »

« Despite the weakening of fiscal policy predictability in recent years, the country’s long-standing institutional framework remains strong and will continue to support the UK’s ability to respond to shocks, as seen during the pandemic. “, said the agency.

Credit rating is an indicator of a government’s likelihood of repaying its debts and affects the government’s cost of borrowing money from international financial markets – a lower credit rating in theory means lower interest rates. higher interest.