The White House and the US Treasury Department have both expressed their objections to the decision made by credit rating company Fitch to downgrade the long-term rating of the United States from AAA to AA+. White House press secretary Karine Jean-Pierre stated that they strongly disagree with this decision, as it goes against the reality of the robust recovery led by President Joe Biden in the American economy.
Treasury Secretary Janet Yellen also voiced her disagreement with Fitch’s decision, arguing that it is arbitrary and based on outdated data. She emphasized that US Treasury securities remain the world’s preeminent safe and liquid asset.
Fitch is one of the three major US credit rating agencies, alongside Moody’s and Standard & Poor’s. On Tuesday afternoon, Fitch announced the downgrade of Washington’s long-term foreign-currency issuer default rating. The reasons cited for the downgrade include issues with governance, rising deficits, and the looming possibility of a recession, among others.
Fitch’s decision reflects the expected deterioration of the US fiscal situation over the next three years, as well as the high and growing general government debt burden. Fitch also pointed out the erosion of governance relative to other countries with a similar rating over the past 20 years, highlighting the repeated debt limit standoffs and last-minute resolutions that have occurred.
The credit rating agency predicted a growing government deficit and highlighted that the US debt-to-GDP ratio currently stands at 100.1%, which is two and a half times higher than the median of 39.3% for AAA-rated countries. Fitch also mentioned the Federal Reserve’s recent credit rate hikes, weakening business investment, and a slowdown in consumption as factors contributing to its prediction of a mild recession in the fourth quarter of 2023 and the first quarter of 2024.
The downgrading of the US long-term rating by Fitch has raised concerns about the country’s financial stability and the impact it may have on international markets. The White House and the Treasury Department’s objections to the decision reflect their confidence in the resilience of the American economy and their belief that it will continue to recover and thrive under President Biden’s leadership.
It remains to be seen how this downgrade will affect investor confidence in US bonds and the overall perception of the country’s creditworthiness. However, the US government is likely to continue its efforts to address the concerns raised by Fitch and other credit rating agencies to maintain its position as a global economic powerhouse.
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