Credit rating agency Moody’s has warned that the UK’s new fiscal policy regime is “credit negative” in another blow to chancellor Kwasi Kwarteng.
The pound took another hammering during early trade today while London’s blue-chip share index slumped into the red after the UK Government was heavily criticised by the International Monetary Fund over its handling of economic policy.
Sterling fell back to 1.06 US dollars at one stage, having recovered to 1.08 US dollars on Tuesday after Monday’s bloodbath saw it reach an all-time low against the greenback.
The FTSE 100 Index also fell sharply after opening on Wednesday, falling more than 2 per cent at one stage – down nearly 140 points at 6846.4 – and appearing to head for its lowest level for more than a year.
Craig Erlam, senior market analyst at OANDA, said: “It appears everyone is unusually united in their objection to the Treasury’s tax-cutting plans at a time when inflation is almost 10 per cent and rising.
“Moody’s was equally scathing, warning that the measures are a credit negative that could threaten the country’s credibility with investors and more permanently weaken the UK’s debt affordability.
“It’s no surprise then to see sterling plummet once more alongside Kwasi Kwarteng and Liz Truss’s credibility on the world stage. Not the best start to life in Downing Street.”
Moody’s posted its own warnings, saying: “A sustained confidence shock arising from market concerns over the credibility of the government’s fiscal strategy could permanently weaken the UK’s debt affordability.”
Read their update in full below: