Fitch warns of U.S. downgrade if no budget deal in 2013

NEW YORK Mon Nov 28, 2011 6:39pm EST

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

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

Credit: Reuters/Jessica Rinaldi

NEW YORK (Reuters) - Fitch Ratings gave the United States until 2013 to come up with a "credible plan" to tackle its ballooning budget deficit before it downgrades the country's coveted AAA rating.

The ratings agency said on Monday it revised to negative from stable the outlook on the U.S. credit rating after a special congressional committee failed last week to agree on at least $1.2 trillion in deficit-reduction measures.

"The negative outlook reflects Fitch's declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the U.S. AAA sovereign rating will be forthcoming," the ratings agency said in a statement.

The so-called "Super Committee" of six Democrats and six Republicans last week said they could not agree by their deadline on deficit reduction, setting in motion automatic cuts that should result in lowering the deficit by $1.2 trillion over 10 years. The cuts are designed to be split evenly between domestic and military programs.

Rival agency Standard & Poor's cut the U.S. rating to AA-plus in an unprecedented decision on August 5, citing concerns about the government's budget deficit and rising debt burden. It maintains a negative outlook on the credit.

Moody's Investor Service assigned its U.S. credit rating a negative outlook on August 2 but affirmed the country's top-notch standing at Aaa. That leaves Moody's with a general time frame of 18 months to two years in which it could decide whether to cut the rating.

Both S&P and Moody's said on November 21 the committee's failure would have no immediate impact on their ratings.

However, Moody's on November 23 warned the United States that its rating could be in jeopardy if lawmakers backtrack on the automatic cuts of $1.2 trillion due to take effect starting in 2013.

(Reporting by Walter Brandimarte; Editing by Kenneth Barry and Dan Grebler)

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Comments (8)
THeRmoNukE wrote:
1 to go… how long before every regulated fund manager in the country has to dump their treasuries due to not meeting the AAA mandate?

Nov 28, 2011 4:46pm EST  --  Report as abuse
philosophy3 wrote:
When are we going to downgrade those rating companies. They just create more mess
Shortly a B- will be the best

Nov 28, 2011 4:47pm EST  --  Report as abuse
MarketForce wrote:
Ratings agencies? Really? These are the same corrupt outfits that rated CitiGroup a buy at $34.20.

Anyone still believing these hoakie outfits probably buys penis enlargement cream via e-mail offers.

Nov 28, 2011 5:07pm EST  --  Report as abuse
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