Expensive energy threatens British growth and reignites warning about interest and debt
Official OBR forecast sees the cost of energy slowing down the UK economy, putting pressure on inflation and making interest and debt more expensive.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM BBC BUSINESS · 2 MIN
According to BBC Business, the United Kingdom feels the effects of the conflict between the United States and Iran on its own economy, even without direct involvement in the confrontation. The transmission channel is the price of energy, which has soared and is expected to reduce growth in the short term, increase inflation and leave the population's standard of living at a level that the Office for Budget Responsibility (OBR) describes as dismal.
The OBR projection was the first official assessment of the British economy since the start of the war in the Middle East. For the organization, the rise in energy is currently the biggest risk for the economy in the near future, ahead of other factors that usually dominate the debate on growth.
There is one detail that catches your attention. The agency raised its growth projection for this year, but sharply cut its estimate for the following year, from 1.6% to 1%. The relief now, therefore, does not translate into lasting impetus, and the expected recovery loses pace precisely when the cost of living increases.
The point that interests most investors is interest. Still according to the same assessment, rates should rise, making credit more expensive for families and companies and also the payment of public debt. When the State spends more to finance the debt, there is less space in the budget for other priorities, and this is exactly the central discussion for those who defend fiscal responsibility.
Chancellor (Minister of Finance) John Healey stated that the country faces "real challenges ahead" and announced measures that, according to him, will give families a breather in the coming months. In the government's view, these are global economic storms that need to be faced with clear choices about the direction. For the liberal line, the question is whether these immediate relief measures fit into the budget or whether they just transfer the cost to interest rates and the taxpayer.
What changes for the investor
The message for investors is to pay attention to the interest rate scenario. If the forecast of rising rates is confirmed, debt securities and shares of more indebted companies may feel the pressure, while sectors that are highly dependent on energy tend to have higher costs. It is worth monitoring the next interest rate decisions, the behavior of inflation and the final design of the government's measures, which will determine whether the relief will be temporary or whether the bill will reach the public budget. This text is informative and does not constitute a recommendation to buy or sell assets.
Automatically translated from Portuguese.
