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Fitch Downgrades US Credit Rating from AAA to AA+

Fitch Downgrades US Credit Rating from AAA to AA+

Fitch Downgrades US Credit Rating from AAA to AA+

Credit rating agency Fitch announced on Tuesday that it has downgraded the United States’ long-term foreign currency issuer default rating from AAA to AA+. The downgrade is a result of expected fiscal deterioration over the next three years, an erosion of governance, and a growing general debt burden. Fitch cited the repeated debt-limit political standoffs and last-minute resolutions as factors that have eroded confidence in fiscal management.

In May, Fitch placed the nation’s AAA rating on negative watch due to the debt ceiling fight. The agency highlighted the recent debt limit feud and the steady deterioration in standards of governance over the last 20 years as reasons for the downgrade. Fitch also noted the rising general government deficit, which is expected to reach 6.3% of GDP in 2023, up from 3.7% in 2022.

The agency warned that a combination of tightening credit conditions, weakening business investment, and a slowdown in consumption could lead to a mild recession in the fourth quarter of 2023 and the first quarter of 2024.

The White House disagreed with Fitch’s downgrade, stating that it defies reality to downgrade the United States at a time when President Biden has delivered the strongest recovery of any major economy in the world.

This is not the first time a rating agency has downgraded the U.S. credit rating. Standard & Poor’s cut the nation’s credit rating from AAA to AA+ in 2011 due to political risk. The downgrade by Fitch could lead to higher borrowing costs for the government and potentially cause financial turmoil.

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