Fitch affirms USA credit rating at AA+ with a stable outlook

It’s not AAA anymore but that’s a win.

• Key takeaways:
  • US benefits from economic strength, reserve currency status
  • High deficits, debt, and political polarization remain concerns
  • 2024 election unlikely to significantly change fiscal outlook
  • Deficits expected to remain high: 8.1% of GDP in 2024, 7.7% in 2025-26
  • Government debt-to-GDP ratio projected to hit 124.4% by end-2026
  • GDP growth forecast: 2.1% in 2024, slowing to 1.6% average in 2025-26
  • Fed rate cuts expected: First cut in Sept 2024, total 175bps through 2025
• Negative rating action could stem from:
  • Marked increase in government debt
  • Decline in US dollar’s reserve currency status
• Positive rating action possible with:
  • Fiscal adjustment leading to medium-term debt reduction
  • Improved governance

‘Improved governance’… well, at least there is a low bar. Meanwhile, those deficits are massive relative to other trading partners. While they are boosting growth, you have to recoil at what they will be if/when the US runs into a recession.

This article was written by Adam Button at www.forexlive.com.