Fitch Ratings in New York, USA.
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According to Elliot Hentov, head of macro policy research at State Street Global Advisors, rising political instability means the US may not be able to regain its AAA rating with Fitch in the near future.
Global stock markets fell heavily on Wednesday After rating agency Fitch downgrade United States long-term foreign currency issuer default rating downgraded from AAA to AA+, citing “fiscal slippage expected over next three years” and governance downgrade in light of “repeated actions” . debt ceiling political impasse And resolution at the last moment.”
big-name bank boss and economists dismissed the decision as saying “it doesn’t really matter,” and Hentov agreed that he did not think it was a “material development”.
“The ratings are basically a sign of a slow down,” he told CNBC’s “Squawk Box Europe” on Thursday.
“I think it doesn’t take a grand sovereign and analytical genius to understand that America’s fiscal profile is a lot worse than it’s ever been, the charge governance of the public debt is a lot worse than it’s ever been, and it’s clearly Not comparable to any other AAA out there.”
was part of hentov The team at Standard & Poor’s famously downgraded the credit rating of the US government in 2011citing political polarization in Washington after a prolonged and fractious tussle over raising the debt ceiling.
In May this year, another standoff between the White House and opposition Republicans over raising the US debt ceiling pushed the world’s largest economy to the brink of defaulting on its bills once again. President Joe Biden and House Speaker Kevin McCarthy reached a last-minute compromise,
Asked whether the US is likely to get back its “risk-free” AAA rating from Fitch anytime soon, Hentov replied categorically “no”.
“That’s the short answer, unless you imagine American politics turning toward a more stable, predictable path.”
Jim Reid, head of global economics and thematic research at Deutsche Bank, said that despite the debt ceiling dispute similarities, the August 2011 downgrade from S&P came against a very different political backdrop.
“The debt ceiling fight and the grade downgrade happened simultaneously. Also S&P was the first to downgrade the US from AAA and the immediate blow was much deeper than when the other agency did so 12 years later,” he added.
Meanwhile, the Federal Reserve was cutting rates and committed at its August policy meeting to keep rates at “extraordinarily low levels through at least the middle of 2023,” Reid highlighted in an email Wednesday.