Fitch cited the worsening political polarisation around spending and tax policy as a key reason for the downgrade. It said US governance has declined relative to other highly rated countries and it noted “repeated debt limit standoffs and last-minute resolutions.”
“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.
US Treasury Secretary Janet Yellen criticised the move.
“I strongly disagree with Fitch Ratings’ decision. The change by Fitch Ratings announced today is arbitrary and based on outdated data,” Yellen said in a statement.
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The US dollar moved lower against the Australian dollar and other major currencies after the announcement.
In 2011,Standard&Poors stripped the US of its prize AAA rating and also pointed to partisan divisions that made it difficult for the world’s biggest economy to control spending or raise taxes enough to reduce its debt. Its rating is still AA+,which is its second highest.