Even though the US Congress passed a last-minute agreement to prevent the country from defaulting, Fitch still kept the country on its rating downgrade watchlist.
In its first statement after the US Senate passed the debt ceiling agreement on the evening of May 1st, credit rating agency Fitch Ratings said it was maintaining the US's rating as "Rating Watch Negative." They will decide whether or not to downgrade between now and the end of September.
While rating the debt ceiling agreement as "positive," Fitch expressed concern about the US's continued deadlock in debt ceiling negotiations and the deepening partisan divide. "Fitch believes that the political impasse and the decision to suspend the debt ceiling ahead of schedule have lowered confidence in the US's ability to manage its fiscal and debt issues," the statement said.
This is also the reason why S&P downgraded the US rating in 2011. This was an unprecedented move, despite the US Congress having agreed to raise the debt ceiling at the time.
Fitch noted that "governance quality has gradually deteriorated over the past 15 years." On CNN , Richard Francis, Head of National Credit Ratings at Fitch, stated that "governance quality in the US is generally weaker" compared to other countries with similar ratings. However, the US compensates for this with other strengths, such as the global role of the USD.
A downgrade in the rating would increase the U.S. government's borrowing costs. This would force Washington to pay more interest, cutting spending on education , healthcare, defense, and other priorities.
Fitch is one of the world's top three credit rating agencies. Last week, they announced that the US rating remains at its highest level, AAA, but the country will be placed on "Rating Watch Negative" due to uncertainty surrounding debt ceiling negotiations, which puts the US at risk of defaulting for the first time in history.
Ha Thu (according to CNN)
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