Credit rating agency Fitch announced on May 24 that the United States’ rating remains at its highest level, AAA.
However, they will place the country on “Rating Watch Negative” due to uncertainty surrounding the ongoing debt ceiling negotiations, which puts the US at risk of defaulting on its debt for the first time in history.
Democratic and Republican lawmakers have yet to reach an agreement on raising the debt ceiling after months of negotiations. Earlier, US Treasury Secretary Janet Yellen warned that the country would run out of money to fund its operations starting from June 1. If the US defaults on its debt, the consequences for its economy and the world would be significant.
“Rating Watch Negative reflects the increasing political polarization in the United States, further complicating the prospects for resolving the debt ceiling issue, despite the approaching deadline,” explained Fitch in yesterday’s statement. Fitch is one of the three leading credit rating agencies globally, alongside Moody’s and S&P.
The US will face a credit rating downgrade if lawmakers fail to reach an agreement on raising the debt ceiling. However, Fitch still has confidence that US officials will find a solution before the deadline.
In 2011, the US Congress reached a debt ceiling agreement just two days before the Treasury estimated that the budget would be exhausted. During that time, financial markets experienced their worst week since 2008.
2011 was also the first and only year that the US was downgraded in its credit rating when S&P lowered its rating to AA+ (the highest being AAA). This rating has been maintained until now. In 2013, the debt ceiling showdown even led to a government shutdown in the US.
(VIR)