2023-08-02 08:20:32
Thus, at the beginning of June, the administration of Democratic President Joe Biden and the Republican opposition had reached an agreement in extremis.
Yet beyond this agreement, “there has been a steady deterioration in governance standards over the past 20 years, including in fiscal and debt matters,” Fitch lamented.
No lasting impact on the markets
His decision, unexpected and unprecedented for more than 10 years within the three main rating agencies, did not seem to worry analysts interviewed Tuesday evening by AFP.
«I don’t expect the downgrade to have a lasting impact on the market“, thus commented John Canavan, of Oxford Economics, who does not anticipate “major volatility” at the opening of the American markets on Wednesday morning.
In the short term, however, thiscould lead some investors to reduce their exposure to the Treasury», notes for his part Mickey Levy, of Berenberg. But in the longer term, he only seesno serious implications. I think everyone is quite aware of the growing debt situation».
«We strongly disagree with this decision.“, reacted the spokesperson for the White House, Karine Jean-Pierre, in a press release, accusing the administration of the previous President of the United States, the Republican Donald Trump, of having led to a deterioration of the criteria taken into account. account by Fitch to establish its ratings.
«It flies in the face of reality to downgrade the United States at a time when President Biden has achieved the strongest recovery of any major economy in the world“, she added.
In the sights of the Biden administration: Donald Trump’s tax reform in 2017, which had reduced the taxes of the richest and those of companies.
Republicans, for their part, regularly accuse Democrats of reckless spending.
Lack of budgetary framework
Tax cuts, but also significant spending, were also singled out by Fitch in his decision, without however targeting any administration specifically.
The “fiscal deterioration expected over the next three years“, as well as'”a high and growing public debt burden“, thus represent significant risks, according to the rating agency.
«The government does not have a medium-term budgetary framework (…) and has a complex budgetary process. These factors, along with several economic shocks, tax cuts and new spending initiatives, have contributed to successive debt increases over the past decade.Fitch noted.
«In addition, only limited progress has been made to address medium-term challenges related to rising pension and health insurance costs due to the aging population.“, further underlined the rating agency.
Fitch warned at the end of May that it could downgrade the United States’ rating because of the risk of default.
The outlook changes from negative to stable, which means that Fitch does not anticipate any further deterioration in the short term.
While many economists, in particular those of the American central bank (Fed), no longer anticipate a recession for the United States, Fitch is still counting on a “slight” contraction of American GDP in the 4th quarter of 2023 and 1st quarter of 2024 .
The agency notes, despite its criticisms, that the American economy is “well diversified” and has a “high income, supported by a dynamic business environment».
«The US dollar is the world’s largest reserve currency, giving the government extraordinary funding flexibility“, it is specified.
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