Fitch Ratings affirms UK's credit rating

The statement noted that Andy Burnham's assumption of the prime ministership marks the sixth change in leadership in the country in just over the last 10 years, yet it conveyed that more political stability is expected for the remainder of the legislative term.

Stating that no significant changes in fiscal rules or macro policies are expected in the near term, the statement expressed that there may be more uncertainty regarding fiscal policy as the next election approaches.

"RISKS TO GROWTH ARE BALANCED"

The statement noted that Gross Domestic Product (GDP) growth in the UK is expected to be 0.9 percent in 2026 and 1.2 percent in 2027, under the influence of high energy prices, tightening financing conditions, and further weakness in the labor market.

The statement indicated that growth in the UK is expected to reach 1.4 percent in 2028, slightly above its trend rate, but still estimated to be about half of the 2.9 percent average growth rate of countries with an "AA" credit rating.

Pointing out that risks to growth show a balanced outlook, the statement noted that faster progress in public investment plans, the widespread adoption of artificial intelligence, or a more comprehensive European Union trade integration than currently negotiated could create moderate upside potential.

The statement emphasized that the decline in migration following the tightening of visa and permanent residency conditions last year poses a downside risk to growth.

Stating that inflation, which was 2.6 percent in June, is expected to rise to 3.7 percent by the end of the year, the statement highlighted that it is projected to fall to the 2 percent level by the end of 2028, in line with the Bank of England's (BoE) target.

Noting that the BoE is expected to keep its policy rate at 3.75 percent throughout 2026, the statement reported that it is subsequently estimated to cut rates in line with the neutral interest rate, bringing it down to 3 percent in 2028.

News Source: 12punto