Fitch downgrades US credit rating
Fitch downgraded the United States' top-notch credit rating by a step on Tuesday, citing a growing federal debt burden and an "erosion of governance" that has manifested in debt limit standoffs.
The decision to downgrade the US from AAA to AA+ sparked a fiery rebuttal from the White House, with press secretary Karine Jean-Pierre saying the move "defies reality."
Treasury Secretary Janet Yellen said in a separate statement that she "strongly" disagreed with Fitch as well, calling the change "arbitrary and based on outdated data."
It is the first such downgrade by a major ratings company in more than a decade. A debt ceiling impasse in 2011 saw S&P lower Washington's AAA rating, drawing bipartisan outrage.
"The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance" relative to peers, said Fitch Ratings on Tuesday.
It added that there was a stable outlook assigned. Yellen said Fitch's quantitative ratings model declined between 2018 and 2020, but the agency was only announcing its change now despite progress seen in indicators.
She argued that US "Treasury securities remain the world's preeminent safe and liquid asset, and that the American economy is fundamentally strong."
While the lifting of the US debt ceiling -- a limit on government borrowing to pay for bills already incurred -- was often routine, it has for several years become a contentious partisan issue.
There is a "clear short-run implication" of the downgrade involving higher bond yields and a potential sell-off in the stock market and the dollar, said Mickey Levy of Berenberg Capital Markets.
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