Fitch warns of downgrading US credit rating

Fitch said the US Congress's deadlock in debt ceiling negotiations could threaten the credit rating of the world's largest economy .

Fitch Ratings announced on May 24 that the US's rating remains at its highest level, AAA. However, they will place the country on "Rating Watch Negative" due to the uncertainty surrounding the current debt ceiling negotiations that puts the US at risk of defaulting on its debt for the first time in history.

Democrats and Republicans have yet to agree on raising the debt ceiling after months of negotiations. US Treasury Secretary Janet Yellen has warned that the country will run out of money to pay for its operations from June 1. If the US defaults on its debt, the consequences for the economy and the world will be huge.

"The Downgrade reflects the growing political partisan divide in the US, which complicates the prospects for resolving the debt ceiling issue, despite the approaching deadline," Fitch explained in a statement yesterday. Fitch is one of the world's three leading credit rating agencies, along with Moody's and S&P.

The US will lose its credit rating if lawmakers cannot agree on raising the debt ceiling. However, Fitch believes US officials will find a solution before the deadline.

In 2011, Congress reached a deal to raise the debt ceiling just two days before the Treasury Department estimated funds would run out. Financial markets then had their worst week since 2008.

2011 was also the first and only year that the US suffered a credit downgrade, when S&P downgraded the US to AA+ (the highest level is AAA). This level has been maintained to the present. In 2013, the debt ceiling battle even caused the US government to shut down.

Experts say that a US default could shake the global economy and create a new recession. Interest rates for the US government and people would rise. World economic growth would also be dragged down.

Ha Thu (according to CNN)

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