US credit rating to stay on Fitch’s ‘negative watch’ despite debt limit deal

Fitch Ratings, a prominent credit rating agency, Said The country’s highest rating on Friday was announced to remain on the “negative watch” list after Congress successfully passed a bipartisan bill to raise the debt ceiling, just days away from a critical deadline to prevent a national debt default. The day has come.

In a note Friday afternoon, the agency said the country’s ‘AAA’ sovereign rating was “backed by extraordinary strengths”, citing “the size of the economy, high GDP per capita and dynamic business environment”.

But it also warned of “relentless political conflict” over the debt ceiling, which caps the government’s debt to pay the country’s bills, and “last-minute suspensions” to prevent debt defaults. Hour 11 “Lower confidence in governance on fiscal and debt issues.”

President Biden is expected to sign the bill into law on Friday, ending weeks of tense negotiations between the two countries over how to deal with the debt ceiling while finding common ground on the deficit plan.

The Treasury Department warned on Monday that without action from Congress, the government risks defaulting on debt that ballooned to about $31.4 trillion in January.

This drastic plan includes suspending the debt ceiling until next year, imposing new limits on federal spending, changing the work requirements of certain federal aid programs, and recapturing some of the coronavirus funding. It also includes policies that require

Earlier this week, the Congressional Budget Office (CBO) said the deal could cut the projected deficit by about $1.5 trillion over the next decade.

Fitch said, “Despite political partisan conflicts, it is a positive consideration to reach an agreement while gradually reducing the budget deficit over the next two years.” Failure to address fiscal challenges through brinkmanship and increased mandatory spending has resulted in higher budget deficits.” It will lead to increased budget deficits and debt burdens. “

The company said it plans to end the “negative watch on the US ‘AAA’ rating” in the third quarter of 2023.

“The consistency and credibility of policymaking and the projected medium-term fiscal and debt trajectory will be important factors in our assessment,” he added.