In contrast to S&P who immersed themselves directly in the US political process and didn’t even wait to see what the Congressional committee would come up with in November in terms of budget cuts, Fitch is taking a more patient role as they reiterate the AAA rating of the US with a stable outlook but with caveats and an eye toward November. Their AAA rating “reflects the fact that the key pillars of the US’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.” They did say though that they will “review its fiscal projections in light of the outcome of the deliberations of the Joint Select Committee as well as its near and medium-term economic outlook for the US by the end of the year. An upward revision to Fitch’s medium to long-term projections for public debt either as a result of weaker than expected economic recovery or the failure of the Joint Select Committee to reach agreement on at least $1.2T of deficit reduction measures would LIKELY RESULT IN NEGATIVE ACTION. The rating action would most likely be a revision of the rating Outlook to Negative, which would indicate a greater than 50% chance of a downgrade over a 2 yr horizon. Less likely would be a one notch downgrade.”
