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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.
What has Moody’s done?
Moody’s, one of the world’s three leading credit ratings agencies, has cut the UK’s government bond rating from a top AAA rating to AA1.
The agency warned it was thinking of downgrading the UK a year ago so the move is not a shock although the timing was a nasty surprise for the chancellor George Osborne.
The chancellor pinned the government’s austerity programme on cutting the country’s debts and preserving the AAA rating. Coming a month before his budget, Moody’s is effectively saying there is nothing Osborne can do in the short term to improve the UK’s financial situation.
Although the one-notch move is not huge in itself, it is the first time the UK has lost its top credit rating. The other agencies Standard & Poor’s and Fitch still have the UK on AAA although they have previously said they are considering a cut like Moody’s.
Next: Why is Moody’s concerned?
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