Problem in Moody’s and S&P for Great Britain’s new budget

Its new budget boosted the financial markets while the Moody’s and S&P Global rating agencies issued their verdict. The most aggressive fiscal “relaxation” following the 2020 pandemic measures poses new challenges for public finances, according to Moody’s. S&P Global also stated that the Labour Party’s loosest policy would continue to press the public finances of Great Britain. It is the first sense of how rating agencies assess the budget, according to a Bloomberg report, which caused the sale of state bonds, shares and pounds, as investors react to the risk of increasing lending and inflation. The sale that followed the announcement of Minister of Finance Rachel’s budget Reeves in mid-week began to fade on Friday (01.11.2024), although the yield of 10-year-old bonds has increased up to 20 basis points in just five days. In her Friday report, Moody’s said that the increase in lending would be a ‘additional challenge’ for the already difficult prospects for fiscal consolidation in the United Kingdom. Financial markets should “keep more sensitive to the possibility of wrong UK policy movements, due to the turmoil in the gold bond market that followed the September 2022 mini budget,” Moody’s analysts said. The house scores the United Kingdom with Aa3 with stable prospects. The measures presented on Wednesday included an annual increase in public expenditure by £70 billion and an additional £100 billion for expenditure on capital projects. S&P, which assesses the United Kingdom as an A with a stable outlook, has kept the key debt forecasts unchanged, because “its current forecasts already contain broader deficits reflecting sustained public spending pressures”.