On Tuesday, Fitch made public its decision to lower the United States’ long-term foreign-currency issuer default rating from AAA to AA+, citing the country’s massive debt load and anticipated fiscal deterioration as reasons for the move.
President Biden blames former President Trump and the January 6 riots for the United States’ credit rating drop.
On Wednesday’s FOX Business report, an administration insider said that the underlying model had a AAA rating before Trump took office.
The United States’ long-term foreign-currency issuer default rating was lowered by Fitch from AAA to AA+ on Tuesday. The nation’s enormous debt load and the resulting decline in fiscal health are reflected in the downgrading.
The rating agency decided on Tuesday, citing deteriorating American governance, increasing deficits, and Federal Reserve tightening as reasons for the downgrade. It also believes a modest recession will hit the U.S. economy in the fourth quarter.
U.S. Treasury Secretary Janet Yellen criticized Fitch’s decision, saying that the rating agency used out-of-date information and that the situation has improved during the Biden administration.
Yellen’s comments were a vehement rejection of Fitch Ratings’ verdict. Fitch Ratings’ recent adjustment was made for no good reason and is based on old information.
From 2018 to 2020, Fitch’s quantitative ratings approach drastically weakened.
Nonetheless, Fitch is making the announcement now, even though many of the factors upon which Fitch’s conclusion was based have improved. Many of these indicators have improved under the current administration, particularly those relating to governance, thanks to the passing of bipartisan legislation to raise the debt ceiling, fund infrastructure projects, and boost the United States competitiveness.
Credit ratings are used in the debt capital market to assess the relative safety of debt obligations issued by corporations and governments. The cost of borrowing money is usually greater for borrowers with poorer credit scores.
