Credit rating agency Fitch said Wednesday that it expects U.S. fiscal deficits to remain high this year, and that fiscal policy and the governance implications of the presidential election will be key issues for the country’s sovereign rating.
Last year, Fitch downgraded the U.S. government’s top credit rating from AAA to AA+, citing fiscal deterioration and repeated negotiations over the debt ceiling.
A major shift toward deficit reduction measures is unlikely in the near term due to political polarization, Shelly Shetty, head of Americas Sovereign Ratings at Fitch Ratings, said in a webinar Wednesday.
The US debt rating would be affected by a “marked increase” in general government debt and a decline in the coherence and credibility of policymaking that undermines the US dollar’s reserve currency status, it added.
Fitch’s downgrade in August, two months after the debt ceiling crisis was resolved, sparked an angry response from the White House and surprised investors.
Fitch’s downgrade in August sparked an angry response from the White House and surprised investors. AP
It put a spotlight on the sustainability of the government’s debt, an issue that fueled a bond sell-off in the summer as investors became increasingly concerned about the growing federal debt burden and higher interest payments.
The nonpartisan Congressional Budget Office has estimated cumulative budget deficits of about $20 trillion over the next decade.
A major shift toward deficit-reduction measures is unlikely in the near term due to political polarization, Fitch said. AP
However, Fitch said the U.S. economic outlook has improved. He no longer expects a recession this year, but rather “a more shallow slowdown” than previously anticipated, Fitch chief economist Brian Coulton said in the webinar. When the agency cut the debt rating, it expected a mild recession by the end of 2023 and in the current quarter.
Fitch expects the Federal Reserve to cut interest rates three times this year, a positive for corporate debt issuers, said Winnie Cisar, global head of strategy at CreditSights, a Fitch company.
However, Fitch said the U.S. economic outlook has improved. REUTERS
While the election is unlikely to affect high-yield and leveraged loan issuers’ decisions to tap debt markets, it predicted price volatility in secondary corporate debt markets around the US presidential primaries. March.
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Source: vtt.edu.vn