The UK's credit rating downgrade is a big blow for Osborne

It may have been expected, but the decision by the ratings agency Moody's to downgrade the UK's AAA credit rating, is unwelcome news for the Government.

The Chancellor, George Osborne, has staked his reputation on the rating. Even the Tory manifesto in 2010 said it would be safeguarded. And now it's been cut.

• Read: What are credit ratings and why do they matter?

Moody's has cited the 'subdued medium-term growth prospects' as the reason for the downgrade. No-one's quite sure what impact this will have.

In response, the Chancellor has said this doubles his resolve to stick to his economic plan which includes deficit reduction.

• Watch: Osborne vows to confront debt problems

But there are growing calls for him to change course.

Some are even demanding Mr Osborne quit as Chancellor altogether - although Ed Balls, who's come in for a lot of criticism himself, refused to go quite that far.

Of course other countries have had their ratings cut including the US,the world's biggest economy. That hasn't substantially changed theirborrowing costs.

Although the pound fell last night, most financial analysts don't expect the impact to be significant, given that the markets have been expecting a cut for some time.

At the moment the real loser in all this is the Government, and in particular the Chancellor, who's made retaining the UK's AAA status his priority.

Losing it is a big blow and leaves him open to criticism from all sides.

I have just interviewed Treasury Minister David Gauke. Although he admitted there was 'disappointment' that the UK's AAA credit rating has been cut, he was keen to stress it was only one benchmark.

The most important, he told me, was maintaining low interest rates. The question is whether they will stay quite so low, now that the rating has has been downgraded.