It was big news when S&P downgraded the United States’ credit rating in 2011 over the “political brinksmanship” on raising the debt limit, and now it could happen again, with Fitch Ratings placing the U.S.’ AAA rating on a negative watch list.
Fitch put out a statement making the announcement today, making it clear the United States’ credit rating is not being downgraded yet, but is coming pretty close to it with the current fight in Washington over raising the debt ceiling.
Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default…
The prolonged negotiations over raising the debt ceiling (following the episode in August 2011) risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S. This “faith” is a key reason why the U.S. ‘AAA’ rating can tolerate a substantially higher level of public debt than other ‘AAA’ sovereigns.
S&P, meanwhile, kept America’s credit rating at AA+ earlier this year, and the day before the government shutdown it said it would be unlikely they would downgrade the U.S.’ rating again unless the stalemate went on too long.
[photo via screengrab]
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