Fitch said the US Congress's deadlock in debt ceiling negotiations could threaten the credit rating of the world's largest economy .
Fitch Ratings announced on May 24 that the US's credit rating remains at its highest level of AAA. However, they will place the country on "Rating Watch Negative" due to the uncertainty surrounding the current debt ceiling negotiations that puts the US at risk of defaulting on its debt for the first time in history.
Democrats and Republicans have yet to agree 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 pay for its operations by June 1. If the US defaults on its debt, the consequences for the economy and the world would be dire.
"The downgrade reflects the growing partisan political divide in the United States, which complicates the prospects for resolving the debt ceiling issue, even as the deadline approaches," Fitch explained in a statement yesterday. Fitch is one of the world's three leading credit rating agencies, along with Moody's and S&P.
The US will face a credit downgrade if lawmakers fail to agree on raising the debt ceiling, but Fitch is confident US officials will find a solution before the deadline.
In 2011, Congress reached a deal to raise the debt ceiling just two days before the Treasury Department estimated funds would run out. Financial markets then had their worst week since 2008.
2011 was also the first and only year that the US suffered a credit downgrade, when S&P lowered the US rating to AA+ (the highest level is AAA). This rating has been maintained to this day. In 2013, the debt ceiling battle even caused the US government to shut down.
Experts say that a US default could shake the global economy and trigger a new recession. Interest rates on US government and private loans would rise. Global economic growth would also be dragged down.
Ha Thu (according to CNN)
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