Market Watch: Fitch Warns of Possible Downgrade to U.S. AAA Credit Rating if Shutdown Persists

Article by Rachel Koning Beals in Wall Street Journal Market Watch

The U.S. risks losing its pristine triple-A credit rating later this year if the government shutdown persists and negatively impacts the country’s debt ceiling, Fitch said Wednesday.

The shutdown entered day 19 as a stalemate between President Donald Trump and congressional Democrats over a spending package to fund nine government agencies continues. Lawmakers and the White House are divided over the president’s demand for money for a border wall, a case he took to prime time television Tuesday night, stopping short of declaring an emergency as analysts had speculated.

“I think people are looking at the CBO (Congressional Budget Office) numbers. If people take the time to look at that you can see debt levels moving higher, you can see the interest burden in the U.S. government moving decidedly higher over the next decade,” James McCormack, Fitch’s global head of sovereign ratings told CNBC’s “Squawk Box Europe” Wednesday. He said analysts at Fitch want to see a fiscal adjustment to offset the borrowing burden.

At an event later in London, McCormack added, “If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget... and whether all of that is consistent with triple-A,” CNBC reported from the event.

Fitch had said in a recent report that its sovereign credit view of the world’s largest economy hinged on whether the ongoing shutdown was likely to devolve into a “more pronounced destabilization of fiscal policymaking.”

“Evidence of greater dysfunction in fiscal policymaking could still contribute to negative pressure on the U.S. rating — (and) this is especially the case as deficits continue to increase,” it said in the report.

To read this article in Wall Street Journal Market Watch, click here.