Paris: Fitch Ratings on Friday affirmed US credit ratings at the top-notch “AAA” level but raised the outlook for the world’s top economy to stable from negative.
Fitch said it was raising its outlook to stable in part because of the way the US federal debt limit was suspended in February. It had placed the US economy on negative watch in October.
“The federal debt limit was suspended in mid-February in a timely manner and in a way that avoided casting uncertainty over the full faith and credit of the US, in contrast to the crises in August 2011 and October 2013,” it said.
The raised outlook also reflected the fact that the agency was now expecting the country’s debt to peak at a lower point than previously estimated. Gross general government debt was now estimated to peak at 100 per cent of gross domestic product in 2014, before declining slightly for four years, Fitch said.
“This is below the threshold of 110 per cent that we previously identified as incompatible with a ‘AAA’ rating for the US.”
The agency forecasts federal government debt to reach 72.5 per cent of GDP in 2014.
“The US has greater debt tolerance than ‘AAA’ peers owing to the unparalleled financing flexibility provided by being the issuer of the world’s pre-eminent reserve currency and benchmark fixed income asset,” Fitch said.