US Government’s Credit Rating Downgraded by Fitch Ratings, Citing Governance Deterioration
American credit rating agency Fitch Ratings Inc., one of the market’s leading independent rating agencies, has made the decision to downgrade the US government’s credit rating from AAA to AA+. Fitch believes that there has been a gradual decline in governance standards over the past two decades, particularly in relation to fiscal and debt matters, despite the bipartisan agreement reached in June to suspend the debt limit until January 2025.
This downgrade has not been well-received by US Treasury Secretary Janet Yellen, who considers it arbitrary and based on outdated data. White House Press Secretary Karine Jean-Pierre also expressed displeasure, stating that downgrading the United States at a time when President Biden has overseen the strongest recovery among major economies worldwide defies reality.
Interestingly, Fitch’s credit rating of Israel stands at A+, with a Stable outlook.
Fitch had already hinted at the possibility of a downgrade in May when political tension erupted over the US debt ceiling. Even after the debt ceiling was raised to $31.4 trillion in June, Fitch maintained its intention to review the US rating due to the protracted political conflict.
Following Fitch’s announcement, the US dollar experienced a decline against several currencies, including the Israeli shekel (from NIS 3.71 to 3.66). Additionally, stock futures saw a decrease while Treasury futures rose.
This downgrade recalls a similar event in 2011 when Standard & Poor’s reduced the US top credit rating from ‘AAA’ to A+ following another debt ceiling crisis.
