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Fitch Ratings said it may still downgrade the United States’ credit rating, despite the U.S. House and Senate’s debt ceiling deal.
The U.S. currently has an AAA rating from Fitch, which indicates creditors with the lowest expectation of default risk. A credit rating downgrade would make it more expensive for the U.S. to borrow debt and drain funding from other priorities.
Fitch, one of three major global credit ratings companies, put the nation’s credit rating on a “rating watch negative” in May. The company said that while lawmakers’ ability to come to a deal was a positive development, it would maintain its watch due to increased political polarization in Washington. It plans to make a decision by the end of September.
“Fitch believes that repeated political standoffs around the debt-limit and last-minute suspensions before the x-date” – the day when the government will be unable to pay all its obligations in full and on time – “lowers confidence in governance on fiscal and debt matters,” Fitch said in a Friday announcement.
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The company noted that the U.S. rating is supported by “exceptional strengths,” including the size of its economy and high GDP per capita, but these strengths could be eroded by governance shortcomings.
Fitch’s statement said the company has witnessed “a steady deterioration in governance over the last 15 years” with increased partisanship, citing the contested 2020 election, brinkmanship over the debt limit and failure to tackle fiscal challenges from growing mandatory spending.
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