Gilt market responds positively to budget
The gilt investment market and credit rating agencies have reacted broadly positive after the release of George Osborne's budget today. While initially the yield on the benchmark 10 year gilts fell to 3.4% as the budget speech began, it did increase to 3.45% towards the end of the presentation. While normally an increase in the interest rate on the benchmark 10 year gilt would be taken as a negative sign, many experts believe the good news was already in the price of government gilts.
It seems highly likely that the Office for Budget Responsibility will become a more prominent player in the UK economy in the weeks and months ahead although there are already concerns about potentially "ambitious" growth forecasts for the UK economy. The truth is that whatever figure is pushed into the public domain by the Office for Budget Responsibility it is very easy to criticise these as there is no real precedent for forecasting in the current environment.
It will be interesting to see how the new Office for Budget Responsibility actually performs in the longer-term and whether indeed it does play a prominent role in reining in the power of future governments and especially future Chancellors.
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