The world's largest economy loses triple A credit rating
The United States’ credit rating has been downgraded after a stand-off between the Biden administration and Congress undermined confidence that a ballooning national debt will be repaid.
Ratings agency Fitch on Tuesday lowered the United States’ long-term foreign currency rating to AA+ from AAA.
It said: “The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to AA and AAA rated peers.”
The new US score is nonetheless higher than Fitch’s credit rating for Britain, which remains at AA-.
The decision comes after the United States narrowly avoided defaulting on its debt payment obligations for the first time in history, when the Senate in June agreed to suspend the government’s borrowing limit until January 2025.
The bipartisan agreement followed weeks of fraught negotiations over the debt ceiling between the Republicans and President Joe Biden and was reached just days before the default deadline.
The US rating agency said: “In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025. The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”
However, Janet Yellen, the US Treasury Secretary, said she “strongly” disagreed with the decision and criticised the change as being “arbitrary and based on outdated data”.
She said: “Fitch’s decision does not change what Americans, investors, and people all around the world already know: that Treasury securities remain the world’s preeminent safe and liquid asset, and that the American economy is fundamentally strong.”
A spokesman for the White House said: “We strongly disagree with this decision.”
This article was written by Adam Mawardi from The Telegraph and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.