While we await a possible move from S&P, the only one of the three rating agencies that has thrown themselves directly into the political process, Fitch is first responding to the passage of the debt deal. They said that the deal reached was “commensurate with its ‘AAA’ rating, the risk of sovereign default remains extremely low.” “The agreement is an important first step but not the end of the process towards putting in place a credible plan to reduce the budget deficit to a level that would secure the US AAA status over the medium term.” They expect to finish their scheduled review by the end of August. They summed up with this, “it is essential that a credible multi yr deficit reduction plan is articulated and implemented. On current trends Fitch projects that US government debt, including debt incurred by state and local governments as well as the federal government, will reach 100% of GDP by the end of 2012, and will continue to rise over the medium term, a profile that is not consistent with the US retaining its AAA sovereign rating.”
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