Fitch Issues Warning on America's Credit Rating

Agency says move 'reflects increased partisanship' in debt limit talks
By Rob Quinn,  Newser Staff
Posted May 25, 2023 5:07 AM CDT
Fitch Puts US Credit Rating on Negative Watch
House Speaker Kevin McCarthy speaks with reporters on the debt limit, Wednesday, May 24, 2023.   (AP Photo/Mariam Zuhaib)

With a potential debt default now less than a week away, Fitch Ratings has put America's AAA credit rating on negative watch, meaning a downgrade is possible. Fitch made the same move during a previous debt-limit standoff a decade ago under then-President Obama's administration. The ratings agency said the negative watch "reflects increased political partisanship that is hindering reaching a solution to raise or suspend the debt limit despite the fast-approaching X-date," CNBC reports. The X-date, when the government could start to run out of money if no deal to raise its borrowing limit is reached, could be as soon as June 1.

"Fitch still expects a resolution to the debt limit before the X-date," the credit agency said in a report. "However, we believe risks have risen that the debt limit will not be raised or suspended before the X-date and consequently that the government could begin to miss payments on some of its obligations." The agency, one of the three biggest credit rating firms, said failure to reach a deal would be a "negative signal of the broader governance and willingness of the US to honor its obligations in a timely fashion," Reuters reports.

World markets took a hit after the announcement, which came as negotiations between the White House and House Republicans continued. White House press secretary Karine Jean-Pierre blamed Republicans, who are pressing for deep spending cuts, for risking a potentially devastating debt default in a "manufactured crisis," the AP reports. As lawmakers prepared to leave town for the long weekend, House Speaker Kevin McCarthy said the standoff was not his fault. With the deadline looming next Thursday, McCarthy said he would abide by the rule to post any bill for 72 hours before voting. (More debt limit stories.)

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