Dr Alex Mandilaras comments on UK credit rating downgrade
Tuesday 26 February 2013
The media and public are struggling to understand the impact of the move by credit rating agency Moody’s to down grade the UK from its triple A status. Here Dr Alex Mandilaras, Senior Lecturer in Economics, provides a clear assessment of the implications.
“While no one can claim that UK's credit rating downgrade by Moody's is positive news, it may not be as harmful as people expect. First, investors did not really learn anything new from Moody's decision. The outlook for UK growth has been uncertain for quite a while now and the pound has been falling since the beginning of the year.
Second, no one seriously expects the UK Government to default in its debt obligations so British debt will continue to have 'haven-status'. Finally, let us not forget that the US lost its AAA status in 2011, as did France more recently. Their ability to borrow at low interest rates has not been affected adversely.
The economic challenges the UK is facing are real. The downgrade by Moody's is just a useful reminder of how serious they are. The Chancellor and the Bank of England have to walk a very fine line in trying to stimulate economic activity without generating 'excessive' inflation expectations and raising debt levels further. A weaker pound should help.”
Dr Mandilaras’ online profile gives details of his current research in international finance.
