Fitch warns of downgrading US credit rating due to default risk

Specifically, Fitch has placed the US long-term issuer default rating (IDR) at AAA on its Negative Credit Monitoring List. Fitch said the AAA rating reflects the growing partisan divide that is preventing a consensus from being reached to raise the debt ceiling before the upcoming deadline. However, Fitch still hopes that the parties can reach a consensus on this issue.

The US Treasury Department has warned that it could run out of money to pay its bills by June 1, triggering a debt default with devastating economic consequences, if Congress does not act to raise the debt ceiling. However, negotiations between Republicans and Democrats on raising the debt ceiling have failed to produce results, as the two sides hold different views on the issue.

Republicans say the debt ceiling cannot be raised without drastic measures to reduce the deficit, such as cutting Social Security spending and limiting access to Medicaid, the health care program for the poor. The Biden administration has opposed those measures, instead proposing some spending cuts and tax increases for the wealthiest people and corporations that currently receive large tax breaks. Republicans have rejected those tax increases.

According to VNA