US Treasury Secretary Janet Yellen described the credit rating agency’s decision as arbitrary. At the same time, analysts do not fear that the rating downgrade will lead to major changes in the future.
Fitch Ratings Agency lowered the credit rating of the United States from 3A to 2A+. The decision was justified by the country’s financial situation and concerns about the debt burden. Earlier, Standard & Poor’s stripped the US of its triple A rating.
US Treasury Secretary Janet Yellen described the reduction as arbitrary, and investors were surprised, as Fitch decided to do so after the US government found a solution to avoid the debt crisis.
Given the credit rating agency’s move, lenders may make loans to the federal government on less favorable terms, which could then impact American taxpayers as well. Fitch first raised the possibility of downgrading the country’s rating in May. In June, after the US government found a solution to the debt crisis, the credit rating agency said it would complete its report on the country’s financial situation in the third quarter.
Damaging the popularity of the government and the United States
Fitch believes that continued political deadlock and last-minute decisions on important issues (such as the debt crisis) have undermined confidence in the budget.
In their statement announcing the downgrade, they wrote: The quality of governance has steadily deteriorated over the past two decades, despite a bipartisan agreement reached in June to suspend the debt ceiling until January 2025.
According to analysts, although the downgrade represents a “crack in the American armor,” they do not fear a significant decline in the markets. the ReutersHowever, one analyst, Ed Mills, said that after S&P’s downgrade, most contracts were recast as “triple A” or “government guaranteed” and that a government guarantee meant much more than a Fitch rating.
Additional resources • Reuters
