Moody's strips Britain of coveted triple-A rating

"The strong likelihood is though that it will not materially lead to a change in his plans."

Changes are more likely from the Bank of England, which surprised markets earlier this week after it revealed that Governor Mervyn King and two other policymakers favoured restarting bond purchases to boost the economy.

They remained in the minority among their fellow policymakers but economists increasingly expect more stimulus eventually by the central bank.

This - and the central bank's tolerance of above-target inflation - have combined to put pressure on sterling while leaving British government debt relatively shielded.

Charles Diebel, a fixed income strategist at British bank Lloyds, was sanguine about the impact of the downgrade on gilts, as U.S. and French debt was not badly affected when these countries lost their triple-A ratings.

"This has been speculated as inevitable and is most likely largely in the market. I would expect only very limited damage to the gilt curve and to sterling. Historically, losing your AAA is actually a bond bullish event," he said.

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