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Fitch downgrades US credit rating after debt limit standoffs

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Beiyi Seow, Agence France-Presse

<div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img alt="A file photograph dated 29 April 2010 showing a view of the offices of Fitch Ratings in New York, New York, USA. Justine Lane/EPA/File" src="https://sa.kapamilya.com/absnews/abscbnnews/media/2022/overseas/03/09/fitch.jpg"/><figcaption>A file photograph dated 29 April 2010 showing a view of the offices of Fitch Ratings in New York, New York, USA. <em>Justine Lane/EPA/File</em></figcaption></figure></div><p>WASHINGTON, United States - Fitch downgraded the United States&#x27; credit rating by a step on Tuesday from the top-tier AAA to AA+, citing factors like an &quot;erosion of governance&quot; that has manifested in debt limit standoffs.</p><p>The move is not unprecedented, with a debt ceiling impasse in 2011 leading S&amp;P to lower Washington&#x27;s AAA rating as well, drawing bipartisan outrage.</p><p>&quot;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&quot; relative to peers, said Fitch in a statement.</p><p>It added that there was a stable outlook assigned.</p><ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/business/05/22/23/fitch-affirms-bbb-rating-for-ph-revises-outlook-to-stable">Fitch affirms BBB rating for PH, revises outlook to stable</a></li></ul><p>On Tuesday, Treasury Secretary Janet Yellen said she &quot;strongly&quot; disagreed with Fitch&#x27;s decision, calling it &quot;arbitrary and based on outdated data.&quot;</p><p>She said that Fitch&#x27;s quantitative ratings model declined between 2018 and 2020 but the agency was only announcing its change now despite progress seen in indicators.</p><p>Yellen stressed that &quot;Treasury securities remain the world&#x27;s preeminent safe and liquid asset, and that the American economy is fundamentally strong.&quot;</p><p>While the lifting of the debt ceiling -- a limit on government borrowing to pay for bills already incurred -- was often routine, it has become a contentious issue for several years.</p><div><strong>&#x27;Steady deterioration&#x27;</strong></div><p>In May, Fitch placed the country&#x27;s credit on &quot;rating watch negative,&quot; reflecting increased political partisanship that hampered a resolution to raise or suspend the debt limit ahead of a looming deadline.</p><p>While lawmakers reached a bipartisan agreement to avert a catastrophic default, Fitch in June kept the US on negative watch.</p><p>&quot;In Fitch&#x27;s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters,&quot; the agency said on Tuesday.</p><p>&quot;The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,&quot; Fitch added.</p><p>It also said the US government &quot;lacks a medium-term fiscal framework&quot; and has seen only &quot;limited progress&quot; tackling medium-term challenges related to rising social security and Medicare costs due to an ageing population.</p><p>This year, hard-right Republicans dominating their party&#x27;s narrow majority in the House of Representatives decided to use the debt limit vote as leverage for forcing President Joe Biden into accepting cuts to many Democratic spending priorities.</p><ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/business/05/27/23/what-happens-if-us-fails-to-lift-debt-limit-by-june-5">What happens if US fails to lift debt limit by June 5?</a></li>	<li><a href="https://news.abs-cbn.com/business/05/10/23/us-debt-ceiling-how-default-could-affect-you">US debt ceiling: How default could affect you</a></li>	<li><a href="https://news.abs-cbn.com/business/05/15/23/recession-millions-of-jobs-lost-if-us-defaults-treasury">Recession, millions of jobs lost if US defaults: Treasury</a></li></ul><p>This triggered a test of political strength that threatened to end in chaos before the two sides reached an agreement on the debt ceiling while freezing some budgetary spending in return -- yet stopping well short of Republican demands for cuts.</p><p>bys/st</p><div><strong>© Agence France-Presse</strong></div><figure class="op-interactive"><iframe height="315" src="https://www.youtube.com/embed/wWq3-h1izCU?enablejsapi=1" width="560"></iframe></figure><div class="iwantbar">Watch more News on <a href="https://www.iwanttfc.com/#!/browse/Genres/News/tag_id_genres/id_news" target="_blank">iWantTFC</a></div>

Fitch downgraded the United States' credit rating by a step on Tuesday from the top-tier AAA to AA+, citing factors like an 'erosion of governance' that has manifested in debt limit standoffs.

Fitch downgrades US credit rating after debt limit standoffs

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Fitch downgrades US credit rating after debt limit standoffs

Beiyi Seow,

Agence France-Presse

Published August 02, 2023 07:05 AM PHT

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