Moody's considers that the "continuing weakness in the UK's medium-term growth outlook with a period of sluggish growth," will be extended into the second half of the decade.
The agency is afraid that the "challenges that subdued medium-term growth prospects," will pose difficulties to the "government's fiscal consolidation programme, which will now extend well into the next parliament."
These problems will deteriorate the shock-absorption capacity of the government's balance sheet, that is unlikely to reverse before 2016.
Moody's also downgraded the Bank of England rate to Aa1 from Aaa.
The GBP/USD reacted lower and currently is trading below the1.5200 level around1.5170.