(Adds comment from Fidelity, CMC)
LONDON, March 11 (Reuters) - British finance minister Rishi Sunak on Wednesday announced a 30-billion pound spending splurge in his maiden budget, pledging to do “whatever it takes” to support the economy,
The budget, however, failed to surprise markets as it came just hours after the Bank of England delivered a shock 50 basis-point rate cut. Government budgetary stimulus was widely expected.
Sterling inched up to a session high of $1.2958, though it had already rebounded before the budget from an early low of $1.2830 .
Here of some views from analysts:
Anna Stupnytska, head of global macro, Fidelity International: “The chancellor claimed not to have departed from the fiscal rules which were set just a few months ago. However, this is clearly a stretch as the budget is based on outdated, overly optimistic growth forecasts. With the review of the fiscal framework now under way, it seems likely that this will mark a turning point for the fiscal policy stance in the UK - away from focusing on cutting the level of public debt towards more flexible fiscal rules which would ultimately result in a much higher debt burden.” -Michael Hewson, chief Market Analyst at CMC Markets UK: “There’s something for everyone in terms of giveaways and help for business, but with the economic impact of coronavirus so difficult to measure in terms of timeframe its very much a case of every little helps but it doesn’t make the economic outlook any easier to measure in terms of investability.
“As a joined up response to the coronavirus it appears to strike the right balance, however it remains to be seen whether it will work.” -Sarah Carlson, a Moodys Senior Vice President: “The fiscal stimulus announced by Chancellor Rishi Sunak in today’s budget should help to support economic growth given the economic headwinds created by COVID-19, but the resulting deterioration in the UK’s fiscal position highlights the sovereign’s ongoing difficulty in meaningfully reducing the UK’s gross general government debt burden from its current high levels.” -Derek Halpenny, Head of Research, Global Markets EMEA, MUFG: “There was clearly a greater surprise element to the BoE rate cut than the details of the budget. The more favourable growth-friendly measures in the budget, while welcomed by the markets contained no big-bang shock to shift expectations on growth and hence the response of the pound has been modest.”
-Simon Harvey, analyst at Monex Europe: “Today’s stimulus measures has highlighted the growing trend of economic support to the real economy - targeting SME’s and propping up household finances to mitigate the virus permanently displacing business activity and consumption. The reaction in UK assets, specifically the pound, has been sanguine due to the large number of moving parts currently in play. In our view, the depth and duration of the virus will be key in the short-term for market pricing, although today’s economic measures will likely help alleviate some of the risk-off pressure in UK assets due to improved sentiment.” -Rupert Thompson, Chief Investment Officer at Kingswood: “The budget...follows the move by the Bank of England this morning to cut interest rates and boost bank lending to businesses. Together, these various fiscal and monetary measures amount to a significant stimulus. Even so, it is far from clear if they will be sufficient to prevent the economy dipping into recession over coming months – not least because today’s numbers showed GDP growth grinding to a halt at the start of the year even before the threat from the coronavirus had become apparent.”
Compiled by Sujata Rao; Editing by Tommy Reggiori Wilkes