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AAA Q&A: why the UK's rating downgrade matters
Moody’s decision to strip the UK’s of its prized AAA credit rating late last Friday has huge political, economic and investment significance.
Next: Will inflation rise further?
Will inflation rise further?
Yes, a weak pound is inflationary as it makes the price of imported goods and services more expensive. This is bad news for savers and investors.
The only comfort is that, for now, the stock market is doing well. The FTSE 100 rose 38 points to 6,374 this morning. The blue chip index has surged 8% so far this year because it reflects more of what is going on in the global economy than in the UK.
Broadly speaking, there is growing confidence that China and the US are slowly pulling out of the slowdown caused by the 2008 financial crisis. Although the political deadlock in the US over 'sequestration', or forced spending cuts, casts a long shadow over markets, nevertheless the fact is the UK's budget problems do not figure too highly on a world scale.
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