Fitch lowers UK rating outlook to “negative”

This rating downgrade comes just days after a similar decision by the S&P agency, linked to the significant tax cuts announced by the UK government.

Rating agency Fitch downgraded the UK rating outlook on Wednesdayconstant” to “negative», A few days after a similar decision by the S&P agency, linked to the significant tax cuts announced by the British government on 23 September. These measures taken to promote growthit could lead to a significant increase in budget deficits over the medium termFitch said in his statement.

The US agency maintained the UK sovereign debt rating at AA-, a notch below that of S&P. But the decline in prospects signals the risk of a downgrade of this rating if the country’s economic situation does not improve. The budget packageannounced without compensatory measures or an independent assessment of its impact on public finances, and the discrepancy between fiscal and monetary policies, given the strong inflationary pressures, had, according to Fitch, negative consequences for consumer confidence. structure“, Details the agency.

SEE ALSO – Prime Minister Liz Truss promises to pull the UK out of the “storm”

A lack of encryption

Liz Truss, who arrived in Downing Street in early September, and her Chancellor of the Exchequer Kwasi Kwarteng announced on September 23 a massive energy support plan for families, accompanied by large tax cuts. The absence of data on the amount of the budget mega-package and projections on the impact of this massive spending plan – with no planned spending cuts and debt financing at a time when inflation is skyrocketing and rates are soaring – they have set fire to the financial markets for the past week. The pound fell to an all-time low on September 26.

The British leader and her minister initially defended their approach before finally announcing on Monday that they would abandon some of the more controversial measures, most notably the abolition of the lower tax rate for the upper income bracket. The UK government’s long-term lending rates have soared, making funding for UK debt more expensive at a time when inflation is climbing to nearly 10%, the highest in the G7, and where London wants to borrow much more.

All stimulus measures, including aid for energy bills and total tax cuts (social charges, corporation tax, environmental contributions, etc.), are estimated by economists to be between 100 and 200 billion pounds, but are not been fully paid by the government. On Friday, the S&P rating agency lowered its forecast for the UK rating and rival agency Moody’s had already warned Kwasi Kwarteng that its fiscal strategy was in danger. “permanently weaken the country’s ability to finance itself at an affordable cost“The International Monetary Fund got involved, calling sharply – and unusually – Downing Street to correct the situation.

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