Exclusive: Fitch to decide on U.S. ratings outlook in August

NEW YORK Wed Jul 20, 2011 1:40pm EDT

The Fitch Ratings building is seen in New York May 7, 2010. REUTERS/Jessica Rinaldi

The Fitch Ratings building is seen in New York May 7, 2010.

Credit: Reuters/Jessica Rinaldi

NEW YORK (Reuters) - Fitch Ratings said on Wednesday it will decide next month whether the United States deserves to keep a stable outlook on its AAA credit rating as it concludes a review of the country's economic and fiscal outlook.

David Riley, Fitch's main analyst for the United States, said the decision will take into account a final budget agreement in Washington to reduce the country's deficit in the medium to long term.

"To some extent we are a little bit on hold because we want to see what comes out from the current negotiations," Riley told Reuters in an interview, welcoming the apparent progress being made by a group of six Democrat and Republican senators to cut the deficit by $3.7 trillion.

"As soon as an agreement is reached and has been announced, we will incorporate that into our analysis and we'll make a comment on the U.S. sovereign rating and its outlook -- hopefully by the mid of August."

Fitch is the only of the three big ratings agencies to have a stable outlook on U.S. ratings. Both Moody's and Standard & Poor's have put the ratings on review for a possible downgrade to account for a growing risk that the country's debt ceiling is not raised in time to avoid a default next month.

Fitch still believes the likelihood of a debt default is low, said Riley.

He added it's too early to analyze the impact of Washington's deficit-reduction plans on the country's ratings, but sounded positive on the plan being worked out by the so-called "Gang of Six" Democrat and Republican senators.

"It's encouraging that it does appear to be progress being made in getting at least an agreement in principle on a substantial debt reduction plan," Riley said.

He stressed, however, that the credibility of the final plan will be as important as the headline savings number.

"Most governments can typically come up with a big number and say 'that's what we're going to save', but the issue is how you're going to get from A to B."

(Editing by James Dalgleish)

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