Fitch Ratings has downgraded the United States’ long-term credit rating to AA+ from AAA, citing concerns about fiscal deterioration, debt burden, and an erosion of governance.
Fitch singled out “repeated debt-limit political standoffs and last-minute resolutions” in Congress as an issue that has “eroded confidence in fiscal management” in the U.S.
In May of this year, the ratings agency placed America’s AAA rating on negative watch, blaming the debt ceiling fight that was going on at the time.
President Joe Biden signed new debt ceiling legislation into law on June 2, just days before the federal government in Washington, D.C. was due to default on its debt obligations.
Fitch also highlighted the growing government deficit in the U.S., which it forecasts will reach 6.3% of Gross Domestic Product (GDP) this year, up from 3.7% in 2022.
And the ratings noted that a combination of tightening credit conditions, weakening business investment, and a slowdown in consumption could lead the U.S. economy into a recession in this year’s fourth quarter.
The White House and political leaders in Congress disagreed with Fitch’s downgrade. Treasury Secretary Janet Yellen called the decision by Fitch Ratings “arbitrary.”
This isn’t the first time that a ratings agency has downgraded the U.S.
Standard & Poor’s cut its credit rating on America to AA+ from AAA back in 2011 after a similar standoff in Washington, D.C. over the debt ceiling.
Moody’s (MCO), the third major global credit rating agency, maintains the highest AAA credit rating on the United States’ long-term debt.
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