Fitch cuts US credit rating to AA+; Treasury calls it 'arbitrary'

Fitch downgraded the United States to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.in May, then maintained that position in June after the debt ceiling crisis was resolved, saying it intended to finalize the review in the third quarter of this year.

"In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the rating agency said in a statement.with Fitch's downgrade, in a statement that called it "arbitrary and based on outdated data.

Michael Schulman, chief investment officer at Running Point Capital Advisors said the "U.S. overall will be seen as strong but I think it’s a little chink in our armor."U.S. Capitol police stand outside the Capitol building as the Senate votes on debt ceiling legislation to avoid a historic default at the U.S. Capitol in Washington, U.S., June 1, 2023.

Chart shows that the U.S.'s long-term foreign currency rating was downgraded by Fitch to AA+ in 2023, following a similar move from S&P in 2011.In a previous debt ceiling crisis in 2011, Standard & Poor's cut the top "AAA" rating by one notch a few days after a debt ceiling deal, citing political polarization and insufficient steps to right the nation's fiscal outlook. Its rating is still "AA-plus" - its second highest.

A Moody's Analytics report from May said a downgrade of Treasury debt would set off a cascade of credit implications and downgrades on the debt of many other institutions.

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