US' credit rating kept on negative watch despite debt limit deal: Fitch

By Ovunc Kutlu

ISTANBUL (AA) — The US' credit rating will remain on negative watch despite a recent debt limit agreement, Fitch Ratings said on Friday.

"Reaching an agreement despite heated political partisanship while reducing fiscal deficits modestly over the next two years are positive considerations," the rating agency said in a statement.

"However, Fitch believes that repeated political standoffs around the debt-limit and last-minute suspensions before the x-date (when the Treasury's cash position and extraordinary measures are exhausted) lowers confidence in governance on fiscal and debt matters," it added.

The debt limit bill, which will prevent the American economy from defaulting on its debt obligations, finally passed the Congress late on Thursday after months of debate.

It will suspend the $31.4 trillion cap on the US federal government's borrowing limit through January 2025.

Fitch noted that the deal will provide an estimated $1.5 trillion of savings for the government over the next decade.

While noting that the US' credit rating is supported by the size of the economy, high GDP per capita and dynamic business environment, the agency stressed that "repeated brinkmanship over the debt limit and failure to tackle fiscal challenges from growing mandatory spending has led to rising fiscal deficits and debt burden."

The rating agency said it plans to resolve the US' negative watch status in the third quarter of the year.

Fitch on May 24 placed the US' 'AAA' rating on negative watch, saying that "increased political partisanship is hindering reaching a resolution to raise or suspend the debt limit."