Forecast threatens to spoil the party
CHOPPY waters were predicted for Britain's economy this week as the Bank of England cut its growth forecast.
The Bank said it expected inflation to remain higher for longer and predicted growth would be under three per cent next year, down from its previous forecast of almost 3.5 per cent.
It was the latest in a series of worrying economic data, raising fears over a return to recession or a period of economic depression.
And there was an even more gloomy outlook from credit ratings agency Standard and Poor's (S&P), which forecast 1.8 per cent growth in the same period.
The agency said it was keeping Britain's AAA credit rating 'under review' as more information emerges over the extent of George Osborne's budget measures.
The markets are also said to be needing tough deficit-reduction measures from the chancellor to maintain confidence in the UK economy.
The coveted AAA rating affects interest payments and the price of borrowing, so Osborne understandably wants to protect it. He fears fiscal ruin if faith in Britain's ability to service its debts were to collapse.
But the tough public spending cuts are also blamed for harming growth as hundreds of thousands of job losses are expected.
Private sector employers were expected to create new jobs and boost the economy, but this is increasingly in doubt.
S&P warned Osborne that the budget cuts might not be enough to maintain the AAA rating when the budget was delivered.
But what will the ratings agencies have the chancellor do if the measures lead to a slump in the economy, rising unemployment and falling tax revenues?
The agencies don't always get it right, as their part in the sub-prime mortgage crisis in America proved.
Their influence, however, remains crucial as governments are compelled to embrace fiscal austerity to protect confidence.
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Weather for Wakefield
Wednesday 23 May 2012
Today
Sunny spells
Temperature: 12 C to 23 C
Wind Speed: 10 mph
Wind direction: North east
Tomorrow
Cloudy
Temperature: 10 C to 21 C
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Wind direction: North east
