Fiscal cliff could cost US its triple-A rating: Fitch
19 Dec 2012
Ratings firm Fitch said today that the US stood an increased chance of losing its triple-A status if it didn't overcome the much-talked-about 'fiscal cliff' and Washington failed to prevent $600 billion of spending cuts and tax hikes due to kick in early next year.
"Failure to avoid the fiscal cliff ... would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the US into an avoidable and unnecessary recession," Fitch said in its 2013 global outlook.
"That could erode medium-term growth potential and financial stability. In such a scenario, there would be an increased likelihood that the US would lose its AAA status."
Fitch currently assigns the United States its highest rating but with a negative outlook. Standard & Poor's has already downgraded the world's biggest economy, lowering the United States to AA+ in August 2011.
However, this has not really affected the attraction of US bonds for investors.
Fitch added that an agreement on a multi-year deficit reduction plan to stabilise US debt and public finances was likely to see the country keep its triple-A rating.
However, it went on to say, "Failure to put in place a credible fiscal consolidation strategy during 2013 would be likely to result in the US losing its AAA status."
