BREAKING: Fitch downgrades US credit rating, citing mounting debt and political divisions
Fitch cited the worsening political divisions around spending and tax policy as a key reason for its decision. It said U.S. governance has declined relative to other highly rated countries and it noted “repeated debt limit standoffs and last-minute resolutions.”
Biden administration officials strongly criticized Fitch’s move. Treasury Secretary Janet Yellen said it was “arbitrary” and “based on outdated data.” Yellen noted that the U.S. economy has rapidly recovered from the pandemic recession, with the unemployment rate near a half-century low and the economy expanding at a Fitch informed Biden administration officials that the Jan. 6, 2021 insurrection was a factor in its decision to downgrade because it indicated an unstable government, according to a person familiar with the discussions between the administration and the rating agency.
Another factor in Fitch’s decision is that it expects the U.S. economy to tumble into a “mild recession” in the final three months of this year and early next year. Economists at the Federal Reserve made a similar forecast this spring but then Associated Press Writers Josh Boak and Seung Min Kim contributed to this report.
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