Fitch warns US credit rating could still be downgraded

Even though the US Congress approved a last-minute deal to prevent the country from defaulting on its debt, Fitch kept the country on watch for a downgrade.

In its first announcement after the US Senate approved the debt ceiling deal on the evening of May 1, credit rating agency Fitch Ratings said it would maintain the US's "Rating Watch Negative" status. Between now and the end of September, they will decide whether to downgrade or not.

While rating the debt ceiling deal as "positive," Fitch expressed concern about the continued deadlock in the US debt ceiling negotiations and the worsening partisan divide in the country. "Fitch believes that the political deadlock and the decision to suspend the debt ceiling ahead of schedule have undermined confidence in the US's ability to manage its fiscal and debt affairs," the statement said.

This was also the reason why S&P downgraded the US in 2011. This was an unprecedented move, despite the US Congress agreeing to raise the debt ceiling.

Fitch commented that "the quality of governance has been gradually deteriorating over the past 15 years." On CNN , Richard Francis - Director of National Credit Ratings at Fitch said that "the quality of governance in the US is generally weaker" than other countries with the same rating. However, the US has other strengths to compensate, for example the global role of the USD.

A downgrade would increase the interest costs of the US government's borrowing, forcing Washington to pay more interest and reduce spending on education , health care, defense and other priorities.

Fitch is one of the world's top three credit rating agencies. Last week, they announced that the US's rating would remain at its highest level, AAA, but the country would be placed on "Rating Watch Negative" due to the uncertainty surrounding debt ceiling negotiations that has put the US at risk of defaulting on its debt for the first time in history.

Ha Thu (according to CNN)

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