Reserve Currency, Independent Monetary Policy and Deep Capital Markets…
As an economy holding a global reserve currency and bearer of one of the world’s oldest central banks in the Bank of England, the UK Treasury can live beyond its means for longer than most sovereigns. There are limits, nevertheless, as demonstrated during the brief tenure of the Liz Truss government. But generally speaking, this greater debt tolerance means the UK can sustain higher levels of government debt without suffering the same disciplining responses levied by the capital markets on most other advanced economies.
A comparatively-lower vulnerability to financial-market sell-off also supports the UK’s credit ratings and reduces downside ratings pressure. Our ratings acknowledge the UK’s meaningful institutional strengths including an independent monetary policy, which is an element euro-area sovereigns,…
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