S&P lowers US rating from `AAA' to `AA+'

06 Aug 2011

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Rating agency Standard and Poor's (S&P) today announced a lowering of the long-term credit rating of the United States, the world's largest economy, in the wake of a hesitant budget deficit deal that barely avoided a debt default by the US government.

S&P cut US's long-term credit rating from `AAA' to `AA+' and the short-term rating to `A-1+', giving a fresh blow to the embattled economy.

S&P said the US deficit reduction plan has fallen short of a fiscal consolidation plan and lacked the dynamics necessary to stabilise the government's medium-term debt obligations.

"We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating. We have also removed both the short- and long-term ratings from CreditWatch negative," S&P said in a release.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilise the government's medium-term debt dynamics," it added.

S&P said the US policymaking has lost its effectiveness, stability and predictability and weakened political institutions at a time of ongoing fiscal and economic challenges.

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