Fitch cuts UK credit outlook to negative over deficit fears

Fitch cuts UK credit outlook to negative over deficit fears

Inconsistency between fiscal, monetary policy stance amid inflationary pressures hurting market confidence, warns rating agency

By Aysu Bicer

ANKARA (AA) - Fitch Ratings has cut the UK's credit outlook from stable to negative, pointing to the risk that the country’s economic policies will drive up its deficit.

"The large and unfunded fiscal package announced as part of the new government's growth plan could lead to a significant increase in fiscal deficits over the medium term," warned the global rating agency on Wednesday, confirming the UK’s rating at "AA-," the fourth-highest level.

"And the inconsistency between fiscal and monetary policy stance given strong inflationary pressures, have in Fitch's view, negatively impacted financial markets' confidence and the credibility of the policy framework, a key long-standing rating strength," it underlined in a statement.

In an abrupt U-turn, this week the British government scrapped a proposed cut on the top tax rate of 45%.

The dramatic decision followed 10 days of economic turmoil in the country and the UK pound diving to a historic low against the US dollar.

S&P Global Ratings last week also cut the UK’s outlook, while Moody’s also warned that government plans could lead to rising borrowing costs and larger deficits.

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