Credit rating of the United States downgraded following debt ceiling confrontation

The credit rating of the United States has been downgraded as a result of a standoff between the Biden administration and Congress. This has created uncertainty about the repayment of the country’s increasing national debt. Fitch, one of the three largest rating agencies in the world, has lowered the United States’ long-term foreign currency rating from AAA to AA+.

The downgrade is attributed to the expected fiscal deterioration over the next three years, the high and growing general government debt burden, and a decline in governance when compared to other AA and AAA rated peers. It is worth mentioning that the new credit rating for the United States is still higher than Fitch’s credit rating for the UK, which remains at AA-.

This downgrade may lead to increased borrowing costs for the US government in debt markets.

It is important to note that this decision comes after the United States narrowly avoided defaulting on its debt payment obligations for the first time in history. In June, the Senate agreed to suspend the government’s borrowing limit until January 2025, following weeks of tense negotiations between the Republicans and President Joe Biden. The bipartisan agreement was reached just days before the default deadline.

Fitch states that there has been a consistent deterioration in governance standards over the past two decades, particularly regarding fiscal and debt matters. The repeated political standoffs over the debt limit and last-minute resolutions have eroded confidence in fiscal management.

However, US Treasury Secretary Janet Yellen strongly disagrees with Fitch’s decision. She criticizes the change as arbitrary and based on outdated data. Yellen emphasizes that Treasury securities remain the world’s most secure and liquid assets, and that the American economy is fundamentally strong.

The White House also expresses strong disagreement with Fitch’s decision.