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DBRS eyes the U.K. negatively
DBRS said it placed the United Kingdom of Great Britain and Northern Ireland’s long-term foreign- and local-currency issuer ratings of AA (high) under review with negative implications.
The agency said it was scheduled to review the U.K.’s ratings on Nov. 11; however, the events of the last few weeks prompted it to deviate from its schedule.
“The rating action reflects DBRS Morningstar’s concerns about increasing downside risks in three areas. First, the absence of a credible medium-term fiscal strategy weakens policy credibility and increases the risks to the fiscal outlook. Second, concerns about the inconsistency between fiscal and monetary policies led to a large sell-off of U.K. assets, including sterling and gilts, with government bond yields rising steeply. The sharp fall in sterling and severe volatility in the gilt market could increase risks to the U.K.’s financial flexibility.
“Third, expectations of much tighter monetary policy and steep rises in bond yields is leading to sharply higher interest rates for businesses and households, with adverse implications for the housing market,” the agency said in a press release.
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