Global credit rating agency Fitch has designated the US credit rating as ‘negative observation’. It hinted at the possibility of a credit rating downgrade as the debt negotiations between the White House and the Republican Party were heading to a brink of confrontation.
On the 24th (local time), Fitch announced that it would maintain the current AAA rating, the highest rating for long-term foreign currency denominated U.S. bonds, but raise it to negative observation. Fitch cited the political conflict in the United States as the reason for posting it on the negative observation list. “The designation of the U.S. credit rating under negative observation reflects the growing political confrontation that is creating difficulties in debt negotiations,” Fitch said. “I think the government may not be able to afford some spending,” he said. An X-date marks the beginning of a default in which the U.S. Treasury runs out of cash and fails to pay salaries or interest on government bonds.
“The brinkmanship tactics surrounding the debt ceiling and the failure of US authorities to meaningfully address medium-term fiscal problems that would lead to an increase in debt burden represent downside risks to US credit,” Fitch added. He also pointed out that the unstable governance that the US is showing during debt negotiations and the weakening of fiscal soundness due to excessively high debt do not match the AAA rating, which is the highest credit rating, and can lower trust in the US.
The US already reached the debt ceiling of $31.4 trillion (4.15 trillion won) on January 19 this year, and as of the 23rd, the US Treasury’s emergency fund fell to $76.5 billion before Congress raised the ceiling X He also warned that dating could come. This is because a significant amount of expenditure is concentrated on June 1 and 2, including the maturity of government bonds. Some criticize that U.S. Treasury Secretary Janet Yellen’s warning that the X-date will be on June 1 is an “exaggerated crisis warning,” pointing out that the actual X-date is coming.
After the announcement by Fitch, one of the three major credit rating agencies, the stock market fluctuated, with the US Dow Jones Industrial Average falling 100 points during the day. In 2011, Standard & Poor’s (S&P) downgraded the US credit rating even though Congress agreed to a debt ceiling just before default, which shocked the global stock market.
Additionally, Fitch cited a possible US credit rating downgrade later in the evening after announcing that US working-level negotiations had failed to reach an agreement. Chairman McCarthy said that day, “discussions on raising the debt ceiling are progressing toward agreement,” but that the two parties continue to clash over spending cuts.
New York =
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.