Despite the debt ceiling problem having been resolved two months earlier, rating agency Fitch reduced the United States government’s top credit rating.
Fitch lowered the United States’ rating from AAA to AA+, citing the predicted fiscal deterioration over the following three years and the ongoing, hurried debt ceiling negotiations that threaten the nation’s capacity to pay its debts.
Investors were taken aback by the action, and the White House responded angrily.
After the debt limit situation was resolved in June, Fitch maintained its position that the evaluation would be completed in the third quarter of this year. Fitch had originally raised the prospect of a downgrade in May.
The United States loses its triple-A rating with the downgrade, making it the second major rating agency after Standard & Poor’s to do so.
In response to the news, the dollar declined against several other currencies, stock futures dipped, and Treasury futures climbed. However, several experts and investors stated that they thought the downgrade’s effects would be modest.
Fitch’s move comes two months after Democratic President Joe Biden and the Republican-controlled House of Representatives negotiated a debt ceiling agreement, ending months of political brinkmanship and raising the government’s $31.4 trillion borrowing cap.
Despite the bipartisan agreement in June to suspend the debt limit until January 2025, the rating agency claimed that standards of governance have been steadily declining over the past 20 years, notably in fiscal and financial problems.
Fitch’s downgrading was rejected by US Treasury Secretary Janet Yellen, who described it as “arbitrary and based on outdated data.”
Similar sentiments were expressed by the White House, which stated that it “strongly disagrees with this decision”.
According to White House press secretary Karine Jean-Pierre, “It defies reality to downgrade the United States at a time when President Biden has delivered the strongest recovery of any major economy in the world.”
