The Congressional debt ceiling game is prompting the rating agencies to sound the alarm. S&P could cut the rating to D if it defaults, while Fitch also warns of a downgrade.

  • fitch reviews said the tightrope on the debt limit could harm the prime credit rating of the United States.
  • If the debt ceiling is not lifted in a timely manner, the United States risks a sovereign faulthe writes.
  • A day earlier, S&P said a US default would lead to a credit rating downgrade to a D rating, the lowest.

Fitch Ratings said Friday that the tightrope policy on the US debt limit could hurt the country’s otherwise excellent credit rating, a day after S&P Global Ratings issued an equally stark warning.

Fitch said that while the debt ceiling – the US legislative cap on funding government spending through borrowing – can still be moved, a lack of political consensus on raising or suspending the limit could increase the risk. of a US credit default.

“Fitch believes the debt limit will be raised or suspended in time to avoid an event of default, but if this is not done in a timely manner, the tightrope policy and reduced funding flexibility could increase. US sovereign default risk,” according to the rating. company wrote in a note. In the event of a missed payment, Fitch said it would downgrade the US rating until the default event is resolved.

The memo went on to detail once unthinkable considerations Fitch would take to assess the solvency of the United States: “the willingness to pay, the effectiveness of government and political institutions, the coherence and credibility of the economy. Politicsthe potential long-term impact on the cost of government financing and the cost of capital for the economy as a whole, and the implications for long-term economic growth.”

Fitch has had a negative outlook on the US AAA rating since July 2020.

Fitch’s statement came a day after S&P Global Ratings said an unprecedented US default would lead to a credit downgrade to a D rating, the lowest possible.

“We don’t think that will happen,” Joydeep Mukherji, US credit analyst at S&P, told Reuters.

But if the United States were to default on a single instrument, “no one knows what the impact will be,” Mukherji said. “We don’t know, we don’t want to know but it’s going to be big.”

On Tuesday, Treasury Secretary Janet Yellen announced that the government would exhaust its cash resources by October 18 if the debt ceiling was not raised.


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