Fitch Ratings late Wednesday placed the United States ‘AAA’ long-term foreign-currency issuer default rating (IDR) on rating watch negative. Fitch said the watch negative reflects increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit despite the fast-approaching date when the U.S. Treasury exhausts its cash position and capacity for extraordinary measures without incurring new debt.
The U.S. reached its $31.4 trillion debt limit in January, and the Treasury began taking extraordinary measures to avoid breaching the ceiling. U.S. Treasury Secretary Yellen stated that these extraordinary measures could be exhausted as early as June 1, 2023. In the view of Fitch Ratings, the failure to reach a deal to raise or suspend the debt limit by then would be a negative signal of the broader governance and willingness of the U.S. to honor its obligations in a timely manner, which would be unlikely to be consistent with a ‘AAA’ rating.
