Fitch puts US AAA rating on watch for possible downgrade

by time news

2023-05-25 02:16:30

The rating agency Fitch is concerned about the risk of default that weighs on the United States. Lubo Ivanko / stock.adobe.com

This decision by the rating agency sanctions the inability of the American Congress to agree on a rapid increase in the debt ceiling in order to avoid bankruptcy.

The rating agency Fitch placed Wednesday, May 24 “under surveillance” AAA rating from the United States, the highest possible, due to the risk of default, according to a press release. This decision “reflects political tensions that are hampering resolution of the issue, such as raising or suspending the debt ceiling as the deadline rapidly approaches”explained the organization.

Congress must quickly raise the debt ceiling to avoid bankruptcy, which the US Treasury says could happen in nine days. This ceiling is currently 31,000 billion dollars. Fitch «s’attend» to a timely resolution, the statement said. But experts think that “the risks have increased that the debt ceiling will not be raised or suspended in time and that the government will start to fail to make certain payments”.


The failure to reach an agreement (…) would constitute a negative sign in terms of governance in general and the will of the United States to honor its obligations on time. »

Fitch

President Joe Biden’s teams and Republican camp negotiators have yet to find a compromise. To vote in favor of a higher debt ceiling, the Republicans require a budgetary effort. Democrats also favor deficit reduction, but not in the same way. “Failure to reach an agreement (…) would be a negative sign in terms of governance in general and the willingness of the United States to honor its obligations on time”insisted Fitch.

The rating agency signals that it will be watching what happens closely: if the United States does not pay a debt due on June 1 or 2, it will be considered in default, and the following deadlines, due within 30 days after, will become “very risky” (CCC). Fitch notes, however, that for all other debt, the rating will remain unchanged, as the country holds the largest reserve of silver in the world.

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