Research Update: United Kingdom 'AA/A-1+' Ratings Affirmed; Outlook Stable

We forecast the U.K.'s inflation will average 6.3% in 2022, the highest since 1991, with risks that it could turn out even higher. Upward price pressures, aggravated by the fallout from Russia's military intervention against Ukraine, are driving real incomes lower. We have revised our GDP growth forecast down to 3.5% for 2022, from the 4.6% we projected in December 2021. Inflation is also fueling a rise in the government's interest expenditure but public finances are strengthening overall, with net general government debt projected to fall to 92% of GDP by 2025 from 96% at the end of 2021. In our view, the U.K. benefits from strong institutional settings and a highly effective and credible monetary policy. The Bank of

...- We forecast the U.K.'s inflation will average 6.3% in 2022, the highest since 1991, with risks that it could turn out even higher. - Upward price pressures, aggravated by the fallout from Russia's military intervention against Ukraine, are driving real incomes lower. We have revised our GDP growth forecast down to 3.5% for 2022, from the 4.6% we projected in December 2021. - Inflation is also fueling a rise in the government's interest expenditure but public finances are strengthening overall, with net general government debt projected to fall to 92% of GDP by 2025 from 96% at the end of 2021. - In our view, the U.K. benefits from strong institutional settings and a highly effective and credible monetary policy. The Bank of England (BoE) is in a rate-tightening cycle and we expect inflation will gradually be brought under control by mid-2023. - We affirmed our '##/A-1+'sovereign credit ratings on the U.K. The outlook is stable....

Research Update