The United States’ perfect credit rating may be in danger due to a gridlocked Congress that has brought the country to the verge of default, Fitch warned in a stern statement on Wednesday.
Due to the current debt ceiling debate’s uncertainty and the potential for a first-ever default, the credit ratings agency put the top-ranked US credit rating on rating watch negative.
Even though no agreement has yet been reached, the move comes as Republican and Democratic lawmakers negotiate to raise the US debt ceiling.
With US Treasury Secretary Janet Yellen stating that the country may not be able to pay its debts as soon as June 1, the possibility of an unprecedented default exists, which could have catastrophic results for both the US and the rest of the world.
Fitch, one of the top three credit rating companies, along with Moody’s and S&P, put the US “AAA” on “rating watch negative,” indicating that it might downgrade US debt if lawmakers cannot come to an agreement on a bill to increase the US Treasury’s debt ceiling.
“The Rating Watch Negative reflects increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit despite the fast-approaching x date (when the U.S. Treasury exhausts its cash position and capacity for extraordinary measures without incurring new debt),” the company said in a statement.
Fitch noted that it remained hopeful that parliament will approve a settlement before to the “X-date.””.
The White House emphasized the urgency of raising the debt ceiling on Wednesday in response to Fitch Ratings’ action.
“This is one more piece of evidence that default is not an option and all responsible lawmakers understand that. It reinforces the need for Congress to quickly pass a reasonable, bipartisan agreement to prevent default,” a White House spokesperson said in a statement.
Lily Adams, a Treasury spokesperson, issued a statement in which she stated that “As secretary Yellen has warned for months, brinkmanship over the debt limit does serious harm to businesses and American families, raises short-term borrowing costs for taxpayers, and threatens the credit rating of the United States”.
According to experts, a US default could potentially trigger a recession and have an impact on the entire global economy.
As a result, there may be a significant drag on economic growth and higher borrowing costs for both the federal government and individual Americans.
Source-CNN
