Bloomberg News

U.S. AAA Rating Unlikely to Change Before 2013, Fitch Says

July 10, 2012

Fitch Ratings said the negative outlook on the U.S.’s AAA credit ranking is unlikely to change before late 2013 as it waits to assess any deficit-reduction plans following this year’s elections.

While the U.S.’s top grade is “underpinned” by factors including the nation’s diversified and productive economy and financial flexibility from the dollar’s status as the reserve currency, the outlook “reflects the risks associated with the lack of broad public and political agreement on how to secure deficit reduction,” Fitch said today in a statement.

“Agreement on a multi-year deficit reduction plan that would stabilize government indebtedness and secure confidence in the long-run sustainability of public finances would likely” affirm the U.S. at AAA and raise the outlook to stable, Fitch said. Failure to agree on deficit-reduction that drives increasing indebtedness over the next 10 years would likely cause a downgrade, the New York and London-based firm said.

Moody’s Investors Service, which rates the U.S. at Aaa, lowered its outlook on the nation to negative in August. Standard & Poor’s cut the America one step to AA+ on Aug. 5. Treasuries have rallied 6.8 percent since the S&P downgrade, according to Bank of America Merrill Lynch index data.

Another “debt-ceiling crisis” may spur a review of the U.S. rating, Fitch said. Last year’s borrowing-limit debate was cited by S&P as among the reasons it cut the U.S., and the company has said political and fiscal risks may lead to another downgrade.

Fitch lowered its outlook on the U.S. rating to negative from stable in November on “diminished confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path would be forthcoming,” the company said. The ratings firm forecasts the U.S. economic growth to “gradually accelerate” next year and in 2014 as household debt declines and the housing market stabilizes.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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