Fitch Ratings is maintaining a “AAA” rating for United States. The ratings affirmation pertains to the long-term foreign and local issuer default ratings and the U.S. Treasury security ratings. Fitch is also maintaining that the U.S. Country Ceiling is “AAA.” Unfortunately, the Rating Outlook on the long-term rating remains Negative.
Today’s “AAA” rating is said to be due to high productivity, a diversified and wealthy economy, monetary and exchange rate flexibility, and the ‘exceptional financing flexibility’ from the U.S. Dollar as a global reserve currency.
Another note worth seeing is that the risks from the financial sector are moderating and diminishing. Fitch even called the weak recovery a reflection of the gradual rebalancing of the economy. Fitch even expects that the recovery will gradually accelerate in 2013 and 2014 with a medium-term growth of about 2.5%.
The risks to the rating are U.S. fiscal policy and the European debt crisis. Fitch also noted, “The space for significant U.S. fiscal and monetary policy stimulus is much diminished.”
The loss of the “AAA” rating by many of the greatest nations ended up coming much faster than many investors expected. The loss of the U.S. “AAA” rating elsewhere has also had far less of an impact than many expected. Still, the global economic leaders have to be braced for many more credit events ahead. All you have to do is watch how many credit rating downgrades come out of Europe each week to realize that.
JON C. OGG