A deadlocked Congress that has brought the U.S. to the brink of default could hurt the U.S.’s perfect credit rating, Fitch said in a stark warning on Wednesday.
The credit rating agency downgraded U.S. credit to above-average, reflecting the uncertainty surrounding the ongoing debt ceiling debate and the possibility of an early default.
The move comes as Republican and Democratic lawmakers are negotiating to raise the U.S. debt ceiling. Treasury Secretary Janet Yellen says the US may not be able to pay its bills June 1st soonThe country faces the possibility of an unprecedented default, which could have devastating consequences in the United States and around the world.
Fitch, one of the top three credit rating agencies along with Moody’s and S&P, put the US “AAA” on “Rating Watch Negative”.
“The rating watch negative reflects heightened political bias that could hinder reaching a decision to raise or suspend the debt ceiling as the x date rapidly approaches (when the U.S. Treasury will reduce its cash position and capacity for extraordinary actions without issuing new debt),” the agency said in a statement.
Fitch added, however, that he still hopes lawmakers will pass a resolution before the “X-date.”
The White House on Wednesday pointed to Fitch Ratings’ move as the reason for the rush to raise the debt ceiling.
“This is further evidence that default is not an option and all responsible lawmakers understand that. It reinforces the need for Congress to quickly pass a fair, bipartisan deal to prevent default,” a White House spokesman said in a statement.
The Treasury Department also emphasized that Wednesday night, and a possible downgrade shows why Congress needs to address the debt ceiling immediately.
“As Secretary Yellen has warned for months, an overhang above the debt ceiling would seriously harm businesses and American households, raise taxpayers’ short-term borrowing costs and threaten America’s credit rating,” Treasury spokeswoman Lily Adams said. Report.
“Tonight’s warning underscores the need for swift bipartisan action by Congress to raise or suspend the debt ceiling and avoid a manufactured crisis for our economy,” Adams said.
In 2011, S&P gave its Debt reduction for the first time For the US, it downgraded its rating to AA+. More than a decade later, the company has yet to recover its rating.
According to experts, a US default could send shock waves across the global economy and trigger a recession. This would mean higher borrowing costs for the government and Americans and a massive drag on economic growth.
Dow futures fell more than 85 points Wednesday night amid Fitch’s warning, but the S&P 500 and Nasdaq traded on positive territory.