U.K. Net Borrowing Unsettles, But Offers Room for Maneuver — Market Talk

The latest U.K. public borrowing data presents an uncomfortable background to next month's government budget, though not a critical one, Investec's Philip Shaw says in a note. More challenging is the cocktail of firmer inflation, elevated gilt yields and market expectations of rising interest rates, he says. Together they mark unhelpful drivers in estimating the margin that Treasury chief John Healey might have in meeting his fiscal rules, Shaw notes. While some tax hikes are virtually inevitable at the budget, forecasts in the spring that showed the government had 24 billion pounds of headroom may help to cushion the extent of tax increases, he adds. Cumulative borrowing to August this fiscal year is 8.1 billion pounds above budget watchdog OBR's forecast. (edward.frankl@wsj.com)