Fitch Ratings keeps US at top credit rating
NEW YORK, United States
Fitch Ratings yesterday said it will keep its rating on US debt at the highest grade, AAA, and issued a “stable” outlook, meaning it expects the rating to stay there.
That’s better than the other two main ratings agencies: Moody’s lists the US debt at AAA but says its outlook is negative. And Standard & Poor’s set off a maelstrom in the stock market last week after it took its rating on the US down to the second-highest grade, AA-plus, for the first time.
The S&P cited bickering in Congress over the debt ceiling earlier this summer, as well as the country’s rising proportion of debt, for its downgrade. But Fitch said that it decided to keep its rating because the “key pillars” of US creditworthiness remain intact, including its “flexible, diversified and wealthy economy.”
It also said that the country’s flexibility in monetary policy gives it the ability to absorb economic shocks. The dollar’s central role in the world economy allows the US to hold a higher proportion of debt to gross domestic product.
Fitch said it would revisit the rating after the congressional committee that is supposed to figure out how to cut government spending presents its findings, due by the end of November.
The rating, which measures the possibility that the US will default on its debt, has been a hot-button issue in the past two weeks. Standard & Poor’s downgrade on August 5 ignited a volatile week on Wall Street, with the Dow rising or falling by at least 400 points for four days. The government and some analysts have criticized the S&P’s decision, calling it unjustified and based on faulty math.
The S&P has defended the move, and some analysts have said it is a necessary wakeup call for a government that has been spending too much. The S&P said its downgrade was based on political grandstanding this summer over the debt ceiling. The S&P analysts also said they predict that the country’s debt a portion of output will continue to rise.
The S&P has also pointed out that its downgrade is only to the second-highest rating, saying that the psychological effects are deeper than the practical ones.
“It’s like going from indigo to navy blue,” S&P analyst John Chambers said in a call after the downgrade.
Moody’s assigned a negative outlook to its rating of US credit on August 2. Analysts there said they were uncertain how much the congressional committee will be able to agree on cutting spending.