The credit rating firm Fitch Ratings has reduced the United States’ credit rating from its long-standing AAA status to AA+, which has shocked the financial community.
The United States loses its triple-A rating with the downgrade, making it the second major rating agency after Standard & Poor’s to do so. The downgrading by Fitch, according to U.S. Treasury Secretary Janet Yellen, was “arbitrary and based on outdated data.”
Alarms have been raised about the potential repercussions for the US economy and international financial markets following the downgrading, which occurred amid growing worries about the nation’s economic health.
For many years, the US’s financial strength and stability had been represented by the AAA grade, which allowed the government to borrow money at reduced interest rates and draw in international capital. The downgrading, however, denotes a decline in confidence in the country’s capacity to successfully handle its debt and economic difficulties.
Despite the bipartisan agreement in June to suspend the debt limit until January 2025, the rating agency claimed that standards of governance have been steadily declining over the past 20 years, notably in fiscal and financial problems. The benchmark indices may open significantly lower later Wednesday, according to a decline in U.S. stock futures during European trading.
The cost of insuring U.S. sovereign debt against default remained almost steady on the day, but the yield on the benchmark U.S. Treasury note decreased by 2 basis points to 4.03%, suggesting investors’ confidence in the downgrade’s longer-term effects.
The Republican Party is being blamed by the White House and the Biden campaign for the U.S.’s credit downgrading by Fitch on Tuesday, the first such downgrade in more than ten years. We strongly disagree with this decision.
Statement from Press Secretary Karine Jean-Pierre on the Recent Decision by Fitch Ratings
“The ratings model used by Fitch declined under President Trump and then improved under President Biden, and it defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world. And it’s clear that extremism by Republican officials—from cheerleading default, to undermining governance and democracy, to seeking to extend deficit-busting tax giveaways for the wealthy and corporations—is a continued threat to our economy.”
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