“We have avoided an economic crisis and an economic collapse,” said US President Joe Biden, visibly relieved after the settlement in the budget dispute and the avoidance of bankruptcy of the government in Washington. Such a move could have triggered a global financial crisis and an economic downturn. Despite the compromise between Republicans and Democrats, the world’s largest economy continues to face a credit cut.
The rating agency Fitch said on Friday that “repeated political standoffs over the debt ceiling” and their suspension are only “at the last minute” eroding confidence. Credit watchdogs kept the top AAA rating for the US, but left the credit outlook at negative. The intention is to lift the negative outlook, probably in the third quarter. Last week, Fitch threatened to downgrade for the first time in the course of the debt dispute.
In the US, parliament sets a debt ceiling at irregular intervals and thus determines how much money the state can borrow. Only after weeks of nail-biting were US President Biden’s Democrats able to agree on a compromise with the Republicans. Without the move, the US government would be out of money. Late Thursday night (local time), the US Congress approved the cross-party agreement with the final vote in the Senate.
How Standard & Poor’s views US finances
Fitch is one of the top three rating agencies alongside Moody’s and Standard & Poor’s. Fitch now emphasizes that the agreement is positive “despite heated political discussions”. In fact, the situation in Washington has steadily deteriorated over the past 15 years due to increasing political polarization. In 2011, the US credit rating was downgraded for the only time in history. At that point, Standard & Poor’s dropped its highest rating of “AAA” and has since given the US an “AA+” rating – ie one rating lower.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
