Fitch Says US ‘AAA’ Credit Rating in Jeopardy Without Debt Ceiling Hike

(CN) – The United States’ perfect credit rating will be at risk if Congress failed to raise the debt ceiling this fall, Fitch Ratings said on Wednesday.

The credit ratings agency, which has dual headquarters in New York and London, determines global creditworthiness. In a statement released Wednesday it warned “if the debt limit is not raised in a timely manner, Fitch would review the U.S. sovereign rating, with potentially negative implications.”

The ratings agency also cautioned against any plans to prioritize debt payments, a move Treasury Secretary Steven Mnuchin said he refuses to employ.

“The next Congressional sessions begins on 5 September, with only 12 congressional working days before month-end,” Fitch Ratings said, “We believe there is strong political will to ensure that Treasury securities are honored in full and on time. Treasury Secretary Mnuchin and Senate Majority Leader McConnell both said on 21 August that the debt limit would be raised, with Mnuchin rejecting the idea of prioritization

“In Fitch’s view, the economic impact of stopping other spending to prioritize debt repayment, and potential damage to investor confidence in the full faith and credit of the US, which enables its ‘AAA’ rating to tolerate such high public debt, would be negative for US sovereign credit worthiness,” the statement said.

It added, that while a government shutdown would not alone have a negative impact of the United States’ ‘AAA’ rating, “it would highlight how political divisions pose challenges” to the nation’s budgetary process.

Fitch Ratings is one of the world’s “Big Three credit rating agencies”, the other two being Moody’s and Standard & Poor’s. It is one of the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission in 1975.

 

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