Fitch Ratings said in a stern warning on Wednesday that a deadlocked Congress that has brought America to the brink of default could jeopardize the perfect US credit rating.
The credit rating agency has placed America’s top credit rating on negative watch, reflecting the uncertainty surrounding the current debt ceiling debate and the possibility of a first-ever default.
The move comes as Republican and Democratic lawmakers negotiate to raise the US debt limit, although no agreement has been reached yet. Treasury Secretary Janet Yellen said the United States may not be able to pay its bills As soon as June 1stthe country faces the prospect of an unprecedented default, which could have catastrophic effects both in the United States and throughout the world.
Fitch Ratings, one of the top three credit rating agencies along with Moody’s and Standard & Poor’s, has placed the US credit rating “AAA” on “Negative Rating Watch,” suggesting it may downgrade the US debt rating if lawmakers do not agree on a bill. A law that raises the US Treasury’s debt limit. .
“Negative evaluation monitoring reflects the increasing political partisanship that impedes reaching a decision to raise or suspend the debt limit despite the rapidly approaching date x (when the US Treasury exhausts its cash position and its ability to take extraordinary measures without incurring new debt),” the company said in a statement.
However, Fitch added that she still believes lawmakers will pass a resolution before the “10th deadline.”
On Wednesday, the White House cited Fitch Ratings’ move as a reason for urgency to raise the debt ceiling.
This is further evidence that default is not an option and that all responsible lawmakers understand that. This reinforces the need for Congress to quickly pass a reasonable bipartisan agreement to prevent default, a White House spokesperson said in a statement.
The Treasury Department also reiterated this Wednesday night, and said the potential rating downgrade shows why Congress must address the debt ceiling immediately.
“As Secretary Yellen has warned for months, brinksmanship on the debt limit is doing grave harm to American businesses and households, increasing short-term borrowing costs for taxpayers, and threatening the United States’ credit rating,” Treasury spokeswoman Lily Adams said in a statement. statement.
“Tonight’s warning underscores the need for swift, bipartisan action by Congress to raise or suspend the debt limit and avert a manufactured crisis for our economy,” Adams said.
In 2011, S&P gave a value First ever credit reduction to the United States, downgraded to AA+. More than a decade later, that agency has yet to regain its rating.
Experts say a US default could send shock waves throughout the global economy and potentially cause a recession. That could mean higher borrowing costs for the government and Americans themselves and a massive drag on economic growth.
Dow futures fell more than 85 points Wednesday night amid the Fitch warning, but the S&P 500 and Nasdaq both traded in positive territory.
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