Ratings agency Fitch kept its AAA credit rating for the United States on a negative outlook, despite improvements in Washington’s fiscal picture.
Fitch said the country still merited the top-level triple-A rating due to its “strong economic and credit fundamentals”, underpinned by the US dollar’s role as the world’s leading reserve currency.
But the negative outlook – which raises the chance of a nearterm down grade was merited due to what Fitch on Friday called “continuing uncertainty” over whether the government would act to reduce its debt over the medium and long term.
Fitch also cited looming near-term risks – simultaneous political battles over raising the country’s debt ceiling and passing a federal budget.
It said the US economic recovery is gaining traction, helped by deleveraging in the private sector, a rebound in housing and a slow fall in unemployment. The economy “remains more dynamic and resilient to shocks than its high-grade rating peers”.
At the same time, it warned, the country remains the most heavily indebted country with an AAA credit grade.
In the absence of additional spending reform and revenue mea-sures, deficits and debt will begin to rise again at the end of the decade. Fitch said.
It said it will review the rating by the end of the year, warning that failure to raise the debt ceiling in a timely manner – before fresh spending cutbacks would be forced to keep up payments – will “likely lead to a downgrade”.