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Don't fear the loss of AAA rating, says OBR chief.

THE Treasury's independent economic forecaster has played down the likely damage from any downgrade of Britain's cherished AAA credit rating.

Robert Chote, chairman of the Office for Budget Responsibility (OBR), suggested the loss of the triple-A rating would not necessarily affect the public finances if it simply reflected already-available data.

Other countries had been downgraded by credit ratings agencies without any "noticeable impact" in the markets, he pointed out to the Treasury Select Committee.

Chancellor George Osborne has set a lot of store by the UK's AAA credit rating, which helps the Government borrow at attractive rates because it is at a very low risk of defaulting on its debt.

But economists have predicted a downgrade after the OBR confirmed last week that Mr Osborne would fail to meet his 2015 debt target.

One credit ratings agency, Fitch, warned that Britain's rating was at risk, saying it expected debt by 2015 to be "approaching the upper limit of the level consistent with the UK retaining its AAA status".

But, asked about the fallout from any potential downgrade, Mr Chote told MPs yesterday: "It's not entirely clear that that would be providing any new information to the markets that they had not already managed to deduce from the information on which presumably the credit ratings agencies would have drawn their conclusion.

"I think we've seen other countries suffer that and it's not had an obviously noticeable impact on market views."

Mr Chote also questioned the "slightly debatable premise" about measuring the default risk for a country that prints its own money.

He added that a downgrade would not lead the OBR to revise its forecasts. "We basically take market expectations of interest rates, which presumably incorporate the market's expectations of what the credit ratings agencies might do and how other people might respond to it," he said.
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Geographic Code:4EUUK
Date:Dec 12, 2012
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