If there is one piece of news over which I lost no sleep in the past week it has been the demotion of the UK from its triple A rating by Moody’s credit rating agency. It has no more significance than a critical newspaper article. The US and France have already been degraded with hardly a ripple. Nor have the agencies shown great insight about the strains on the world economy in recent decades. They remain the assessments of individual people.
Rather more important has been the depreciation of sterling. The pound sank by about 25 per cent on the official trade-weighted index at the onset of the world financial crisis in 2007-09. It then started to creep up again in the course of 2012, a development which would have displeased the Treasury and Bank of England because of its supposedly adverse effect on “competitiveness”. They need not have worried. As a reaction to the turmoil of the past few weeks it has now fallen slightly below the post-2009 average and is poised to fall further.
If you telephone anyone in an official position for a reaction you will be told “there is no exchange rate target”. There may be no target, but there is an unannounced policy. All the talk about “rebalancing the economy” means increasing exports relative to imports, an objective that has loomed larger since the disappointing fourth-quarter balance of payments figures.