Markets react to UK downgrade by doing basically nothing

*Yawn*.

We've said again and again and again that credit rating agencies have very little economic effect, and Friday's downgrade of Britain from Aaa to Aa1 rating is proving that to be the case yet again.

The UK government's cost of borrowing, as you can see in this chart via Sky's Ed Conway, is already back at the level it was before the downgrade — and actually lower than it was when markets opened on Friday:

 

Image: Bloomberg

The pound, meanwhile, is stable against the dollar and only slightly down against the Euro. In the context of its yearlong drop, that's a positive:

 

Image: Thompson Reuters

So long as Cameron and Osborne are prepared to ignore the message the downgrade sends — and let's be clear, despite the economically incoherent reasoning Moody's give, the message is that austerity has failed — the markets will continue to respond with a deafening "meh".

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Cabinet audit: what does the appointment of Liam Fox as International Trade Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for International Trade.

Only Nixon, it is said, could have gone to China. Only a politician with the impeccable Commie-bashing credentials of the 37th President had the political capital necessary to strike a deal with the People’s Republic of China.

Theresa May’s great hope is that only Liam Fox, the newly-installed Secretary of State for International Trade, has the Euro-bashing credentials to break the news to the Brexiteers that a deal between a post-Leave United Kingdom and China might be somewhat harder to negotiate than Vote Leave suggested.

The biggest item on the agenda: striking a deal that allows Britain to stay in the single market. Elsewhere, Fox should use his political capital with the Conservative right to wait longer to sign deals than a Remainer would have to, to avoid the United Kingdom being caught in a series of bad deals. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.