- Surging inflation has the UK economy in Q4 depression
- Europe faces geopolitical worries and a challenging economic picture.
- Pound volatility might worsen the fiscal environment.
The S & P Global Ratings showed the United Kingdom enduring a mild Q4 depression that started in 2022 second-quarter as families battle soaring inflation. Remember, inflation hovered at around 10%, and more inclines might appear during winter, impacting spending.
UK Suffering Economic Downturn
S&P showed the United Kingdom endures a massive downturn, with Europe witnessing a challenging winter and soaring credit risk. Tuesday’s report indicated that the Eurozone will not experience growth in 2022 Q4 and 2023 Q1, with the year growth hitting 0.3%. That’s according to the prediction from S&P Global Ratings.
Europe faces a challenging economic picture and a worrying geopolitical tale, with Moscow experiencing increased political risk appetite as Russia losses territories in Ukraine. Moreover, escalated gas prices amidst inflation worsened everything.
The S&P suggested that uncertainty catalyzed interventions supporting consumers and businesses amid quick rate hikes by global central banks. Paul Waters of S&P Regional Credit said the United Kingdom government’s financial policies would safeguard family budgets, ditching a more substantial depression.
Walters trusted the financial policies plus labor market resilience would bolster the United Kingdom economy to escape worse performances. The declining British pound will welcome surged costs of imported goods.
Nevertheless, Waters stated that inflation forces go beyond retail fuel prices. Meanwhile, headline inflation (excluding volatile food, cigarette, liquor, and fuel prices) stayed beyond 6%.
Escalating Pound Volatility Might Worsen Economic Conditions
S&P expects the BOE (Bank of England) to react by increasing rates by February 2023, pushing from 2.25% to 3.2%. That would significantly slow growth and bring inflation to the 2% medium-term benchmark.
Watters concluded that besides regional and global risks associated with the Ukraine-Russia war, extended volatility in the sterling exchange rate plus gilt markets might welcome a distressing monetary situation, worsening the overall economic atmosphere beyond current expectations.
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