Fitch Upholds U.S. Credit Ratings

Upon learning that Fitch Ratings would be unveiling its decision on the United States’ credit ratings this morning shortly after 9 a.m. (EST), there likely was significant hand-wringing and pause before markets and analysts began to read the agency’s verdict. In a bit of relief for those concerned of more economic volatility both domestically and worldwide, Fitch upheld the United State’s top-level credit rating as well as its “stable” outlook.

Fitch affirmed the U.S. long-term foreign and local currency issuer default ratings as well as the U.S. Treasury security ratings and the U.S. Country Ceiling all at the top, “AAA level.” Though noting debt has caused the U.S. fiscal profile to “deteriorate sharply,” Fitch still rates the nation among the most reliable in the world from a credit standpoint:

“The affirmation of the U.S. ‘AAA’ sovereign rating reflects the facts that the key pillars of the U.S.’ exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base. Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to ‘shocks’…U.S. sovereign liabilities, both the dollar and Treasury securities, remain the global benchmark and, accordingly, the U.S. credit profile benefits from unparalleled financing flexibility and enhanced debt tolerance.”

Last week, Standard & Poor’s stripped the United States of its prestigious “AAA” rating on what it described as unease with a political “brinksmanship” that shook its confidence in the nation’s ability to deal with its large debt with the highest level of proper or efficient manner.  S&P lowered its long-term sovereign credit rating for the United States from the top level to AA+, with its short-term rating being affirmed at A-1+. Additionally, the outlook on the long-term rating was set at “negative” by S&P, which hit hard at federal lawmakers over the political theatrics associated with the debt-ceiling debate. Some experts, including NACM Economist Chris Kuehl, intimated the move feeds in to the view that S&P at times uses its ratings to influence nations’ monetary behavior or even punish them for not following their advice.

Speaking on the Fitch Rating, the Conference Board Economist Ken Goldstein told NACM that it, “underlines the point that S&P was making a statement more than assessment. And the question intensifies about whether they were making a statement about government finances or the agency’s ability to assess risk, in the wake of the mortgage debt debacle. It seems from some accounts that they took the GOP to task over resisting increasing revenues. If that is true, one wonders why that hasn’t gotten more play in the [mainstream] press.”

Brian Shappell, NACM staff writer