WASHINGTON — Fitch Ratings on Monday affirmed its long-term credit rating for the United States at AAA, but revised its outlook to negative from stable.
Fitch said the negative outlook, sparked by the federal deficit reduction committee’s failure to agree to $1.2 trillion of cuts to the federal deficit over the next 10 years, indicates a slightly greater than 50% chance of a downgrade over the next two years.
Fitch said the AAA sovereign rating “reflects still strong economic and credit fundamentals.”
Both the dollar and Treasury securities “remain the global benchmark” and the U.S. credit profile “benefits from unparalleled financing flexibility and enhanced debt tolerance,” analysts said.
The U.S. economy “remains one of the most productive in the world, reflected in levels of income per head that are substantially higher than that of major AAA peers,” Fitch said.
But the negative outlook “reflects Fitch’s declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the U.S. AAA sovereign rating will be forthcoming following failure of the Congressional Joint Select Committee on Deficit Reduction to agree” on cuts to the deficit.
Fitch said that while agreement on, and implementation of, a deficit reduction plan in 2013 “would relieve downward pressure on U.S. sovereign ratings,” it would postpone the difficult decisions on taxes and spending until after the presidential and congressional elections and raise the scale of required deficit reduction.
The failure to reach any agreement in 2013 would “likely result in a downgrade of the U.S. rating, Fitch said.
