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Moody's last changed its outlook on Britain one year ago, when
Truss had spooked markets with unfunded tax pledges, culminating
in her resignation.
Her replacement as Prime Minister, Rishi Sunak, reversed those
policy decisions and pledged to restore Britain's economic
stability and fix her mistakes when he took office last October.
"Policy predictability has been restored after heightened
volatility last year around the mini-budget," the ratings agency
said, affirming the country's rating at "Aa3".
"While structural spending pressures and relatively high
inflation will pose risks to the government's ability to fully
deliver on its fiscal plans, Moody's still expects fiscal policy
to gradually tighten over the coming years."
British inflation, at 6.7% in the year to September, is the
highest of any major advanced economy and last week the
International Monetary Fund forecast its economy would grow just
0.5% next year, the weakest in the Group of Seven.
The government borrowed 81.7 billion pounds ($99.35 billion) in
the first half of the 2023/24 financial year, 15.3 billion
pounds more than between April and September 2022, but about 20
billion pounds less than the government forecast in March.
Britain's Office for Budget Responsibility (OBR), which is in
charge of the forecasts, said tax revenue had been higher in
cash terms due to faster than expected inflation and pay growth.
However, finance minister Jeremy Hunt has said the better budget
outcome does not allow scope for the tax cuts which many in his
Conservative Party want to boost their standings in the wake of
recent electoral defeats.
Hunt said on Sunday that Britain's debt servicing costs were
likely to rise by 20 billion to 30 billion pounds a year due to
higher interest rates, and described the increase in borrowing
costs as "clearly not sustainable".
Hunt is due to give a fiscal update on Nov. 22.
Standard and Poor's had already revised up its outlook for
Britain's sovereign credit rating in April, removing the
"negative" label they applied after Truss's mini-budget.
On Friday S&P affirmed its AA rating and stable outlook for
Britain.
($1 = 0.8224 pounds)
(Reporting by Aatrayee Chatterjee in Bengaluru and David
Milliken and Alistair Smout in London; Editing by Shailesh Kuber
and Daniel Wallis)
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