Fitch downgrades U.S credit rating to AA+ after debt limit standoff

Rating agency Fitch has cut the U.S government's credit rating to AA+ from AAA, following concerns over the country's financial state and debt burden. The agency is also expecting fiscal deterioration over the next three years and growing general government debt burden.

Fitch in May had placed its “AAA" rating of US sovereign debt on watch for a possible downgrade, citing downside risk.

This move has come despite the U.S government brought a resolution to the debt crisis by increasing the debt ceiling to $31.4 trillion two months ago.

Also Read: U.S debt ceiling crisis: House passes bill to suspend $31.4 trillion debt

U.S president Joe Biden and the Republican controlled House representatives reached a debt ceiling agreement that lifted the government's $31.4 trillion borrowing limit in June. However, Fitch has said that the repeated political stand-off and last minute resolution plan has eroded confidence in fiscal management.

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management", said Fitch.

The rating agency has also said that there has been a steady deterioration in standards of governance over the last 20 years.

“In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the rating agency said in a statement.

Meanwhile U.S Treasury Secretary Janet Yellen and the White House have disagreed with the downgrade in the rating. Yellen has called the rating “arbitrary and based on outdated data."