Fitch scales back chance of U.S. rating downgrade

LONDON Mon Jan 28, 2013 7:59pm IST

A bank employee counts U.S. hundred dollar bills at Kasikornbank in Bangkok January 21, 2010. REUTERS/Sukree Sukplang/Files

A bank employee counts U.S. hundred dollar bills at Kasikornbank in Bangkok January 21, 2010.

Credit: Reuters/Sukree Sukplang/Files

Related Topics

LONDON (Reuters) - Rating agency Fitch scaled back the chances of it stripping the United States of its AAA status on Monday, saying the recent agreement on the temporary suspension of the country's debt limit removed the near-term risk of a cut.

Earlier this month Fitch said their was a "material risk" of a U.S. sovereign downgrade if there was a repeat of the 2011 debt ceiling spat.

But on Monday the rating agency said last week's deal allowing the U.S. government to keep borrowing through a previous deadline of mid-May was a positive step.

"Without the distraction of a near-term funding crisis for the federal government, Congress and the Administration have the space to focus on the substantive fiscal policy choices necessary to place public finances on a sustainable path over the medium to long-term," Fitch said.

"Agreement on a credible medium-term deficit reduction plan consistent with sustaining the economic recovery would likely result in the affirmation of the U.S. 'AAA' rating and revision of the rating Outlook to Stable from Negative."

Rival rating firm Standard & Poor's has already downgraded the world's biggest economy, lowering it a notch to AA-plus in August 2011 - a move which appears to have done little to dull the attraction of U.S. bonds for investors. Like Fitch, Moody's has it in the top rating bracket but with a downgrade warning.

Despite the more upbeat tone, Fitch said a downgrade was still likely later in the year if Washington failed to use the new breathing space to put in place a credible debt reduction plan.

"In the absence of additional structural measures to narrow the gap between federal outlays and receipts, federal government debt will continue to drift higher and public debt, including that owed by state and local governments will reach around 115% percent of GDP by the end of the decade," it said.

(Reporting by Marc Jones; Editing by Hugh Lawson)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Trade Deal

REUTERS SHOWCASE

Record High

Record High

Nifty hits record high on foreign buying, higher Asian stocks.  Full Article 

Bullish on Equities

Bullish on Equities

Bullish on Indian equities, but gains seen 'less sharp'- Goldman Sachs  Full Article 

BRICS Bank

BRICS Bank

World Bank chief welcomes new BRICS development bank.  Full Article 

Streamlining Operations

Jet Streamlines

Jet Airways chairman says looking to restructure debts, talking to bankers  Full Article 

Political Economy

Political Economy

Analysis - Watch what markets don't do as world politics turns nasty   Full Article 

Photo

Honda's India Thrust

Honda's India unit to account for 25 pct of Asia Pacific sales by March 2017 - exec   Full Article 

 Boosting Output

Boosting Output

NMDC plans to boost iron ore output by two-thirds  Full Article 

Apple Results

Apple Results

Apple margin concerns fade, focus shifts to iPhone launch  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage