British Prime Minister David Cameron’s once-in-a-generation budget gamble is paying off for now as the economy’s unexpected strength eases investors’ qualms over the risk of a renewed recession.
Gross domestic product grew 0.8 percent in the third quarter, twice as fast as analysts forecast, the Office for National Statistics said yesterday. Less than two hours later, Standard & Poor’s said the prime minister’s spending cuts had safeguarded Britain’s top credit rating, which it said is no longer in danger of being downgraded.
Cameron’s government unveiled the biggest budget cuts since World War II last week, eliminating 490,000 jobs in a bid to wipe out a record budget deficit by 2015. His drive, conceived in May to head off a Greek-style fiscal crisis, pushed the yield on the U.K.’s two-year government bond to the lowest on record.
Here in the US investors are now banking on inflation as an investment opportunity. I wonder why?
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