Fitch Ratings has affirmed its sovereign credit ratings on the United States, although the outlook remains negative.
The rating agency said Friday that its decision to affirm the current AAA sovereign rating reflects the country’s strong economic and credit fundamentals, including the global reserve currency status of the U.S. dollar, and its progress on reducing government budget deficits. In particular, it notes that the federal budget deficit has been cut in half since 2010, and is now “approaching a level consistent with debt stabilization.”
Fitch says that its current assessment is that the economic recovery is gaining traction “as the headwinds from private sector debt deleveraging ease. This is underpinned by a pick-up in the housing market and gradual decline in unemployment.”
The outlook remains negative, Fitch notes, “due to continuing uncertainty over the prospect for additional deficit-reduction measures necessary to reduce government indebtedness over the medium to long term”, along with the near-term risk associated with the expiration of federal appropriations authority at the end of the current fiscal year (Sept. 30), and whether there will be a timely increase in the debt limit.
Fitch says it will conduct a further review of the U.S. sovereign ratings by the end of 2013, which is expected to resolve the negative outlook. “This review will reflect our assessment of the prospects for further deficit-reduction measures in future years necessary to contain government deficits in the face of long-term spending pressures and place public debt on a downward path,” it says.