Fitch Ratings placed the United State’s AAA credit rating on “Rating Watch Negative” last week, due to the increased risk of a default on the government’s financial obligations from the debt ceiling standoff.
Fitch said in its statement that repeated brinkmanship over raising the debt ceiling “dents confidence in the effectiveness of the U.S. government and political institutions” and “casts doubt over the full faith and credit of the U.S.”
Earlier in the year, Fitch announced that it would factor in Congress’s actions on preventing a government shutdown and a debt ceiling crisis into its decision to keep the U.S. credit rating at AAA. This latest announcement can be seen as a warning that risking a default on obligations is not characteristic of a country with a AAA credit rating.
Fitch will make the decision whether to lower the U.S. credit rating some time during the first quarter of next year.
Progress made by the newly appointed budget conference committee on fiscal reforms that address the long-term structural challenges of the federal budget will probably factor into Fitch’s decision to retain or lower the U.S. credit rating.
If Fitch does decide to lower the U.S. credit rating from AAA, it would be the second ratings agency to do so in the last two and a half years. Standard and Poor’s downgraded its U.S. credit rating to AA+ after the debt ceiling standoff in 2011.
External links:
Fitch Places United States’ ‘AAA’ on Rating Watch Negative (Fitch Ratings)
