Rating agency Fitch on Tuesday downgraded the US government's top credit rating citing expected fiscal deterioration over the next three years and growing general government debt burden.
Fitch downgraded the United States' Long-Term Foreign-Currency Issuer Default Rating (IDR) to AA+ from AAA, in a move that came despite the resolution of the debt ceiling crisis two months ago.
In May, Fitch had placed its “AAA” rating of US sovereign debt on watch for a possible downgrade, citing downside risk.
Fitch’s move comes two months after Democratic President Joe Biden and the Republican-controlled House of Representatives reached a debt ceiling agreement that lifted the government's $31.4 trillion borrowing limit.
“In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the rating agency said in a statement.
“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” it added.
In 2011, S&P Global Ratings had downgraded the US credit rating to AA+ , one notch below the top tier, after the debt ceiling impasse.
Disagreeing with Fitch’s downgrade, US Treasury Secretary Janet Yellen called the credit rating “arbitrary and based on outdated data.”
The White House also said it “strongly disagrees with this decision”.
“It defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world,” said White House press secretary Karine Jean-Pierre.
US Treasury yields declined in Tokyo on Wednesday after the credit rating downgrade by Fitch lowered.
The 10-year Treasury note declined about 3.2 basis points (bps) to 4.015%.
(With inputs from Reuters)
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