Fitch affirms UK's credit rating

Fitch announced that the UK's long-term credit rating was confirmed at "AA-" and the outlook was set at "stable".

The statement emphasized that the UK's rating is supported by its high-income, large, diversified and flexible economy, reliable macroeconomic policy framework, financing flexibility provided by deep capital markets and the pound's status as an international reserve currency, but pointed out that the country has high public and external debt.

The statement noted that UK Gross Domestic Product (GDP) growth is projected to be 1.2 percent in 2025 and 2026, and that this forecast partly reflects a further cooling of the labor market.

The statement stated that increasing global uncertainty and weakening external demand will slow investment growth in the country, and that economic growth is expected to rise to 1.5 percent in 2027 after remaining below trend for four years, as loosening monetary policy increases consumer spending.

The statement noted that high debt restricts fiscal space, and that general public debt will rise to 103.8 percent of GDP in 2025 and 106 percent by the end of 2027.

The statement explained that inflation, which rose to 3.8 percent in July, is expected to decline to 2.8 percent by the end of 2025 with the decrease in wage inflation and the 7 percent decrease in the energy price ceiling in the third quarter of the year. However, it was emphasized that the risks are on the upward side, especially considering the recent increase in inflation expectations.

Inflation is then forecast to gradually decline and average 2.2 percent in 2026-2027, slightly above the Bank of England's 2 percent target, the statement said.

It was stated that the policy interest rate is assumed to be reduced by 25 basis points to 3.75 percent by the end of 2025, and that it is expected to be reduced to 3 percent in 2027, in line with the neutral interest rate.