Fitch Reduces US Credit Outlook To ‘Negative’ On COVID-19, Election Uncertainty, But Maintains AAA Rating

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On Friday, Fitch’s ratings turned more negative on the outlook for the US gold-plated credit rating. High budget deficits and debt were already on an upward medium-term trajectory before the massive economic shock precipitated by the coronavirus began, the rating agency said giving the United States a “negative” outlook, while maintaining a AAA rating. The United States had the highest government debt of any AAA-rated sovereign as the crisis approached, and Fitch expects general government debt to exceed 130% of GDP by 2021. Sovereign Rating America is supported by structural forces that include the size of the economy, high per capita income, and dynamic business environment. Fitch considers that tolerance for US debt is higher than that of other “AAA” sovereigns. Fitch said he expects negative real interest rates and the Federal Reserve’s continued loose monetary policy to provide some support to public debt dynamics. The report also called for the November elections. “The odds of Democrats overthrowing the Republican Senate majority have shifted in their favor over the past quarter, but either party is unlikely to win a 60-seat majority,” analysts wrote. by Fitch. “The continuation of the political impasse is a risk. Political polarization can weaken institutions and reduce opportunities for bipartisan cooperation, hampering attempts to address structural issues (including some highlighted by the pandemic and protests) but also longer-term fiscal challenges. “

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