(Reuters) – Drawn-out negotiations between the White House and Republicans to raise the $31.4 trillion debt ceiling have unnerved markets and fanned worries about the economic impact of a possible default.
Global rating agencies have warned of a downgrade of the country if a deal is not reached soon. Following are some of the actions by the agencies in recent days:
Fitch earlier this week put the U.S. credit rating on watch for a possible downgrade. The agency currently rates the country’s debt “AAA” – its highest rank.
Fitch said it still expects the standoff to be resolved before the X-date, the deadline after which the federal government would not have enough finances to meet its payments.
Treasury Secretary Janet Yellen has insisted that the actual X-date is June 1, but some Republicans have questioned that deadline.
Fitch has also placed 11 ratings of U.S. credit-linked notes (CLNs) on ratings watch with negative implications.
The agency expects the U.S. government will continue to pay its debts on time, but public statements from lawmakers during the negotiations could prompt a change in its assessments of the U.S. credit outlook before a potential default.
Moody’s currently has an “Aaa” rating for the U.S. government with a stable outlook – its highest creditworthiness evaluation.
The agency has not put U.S. ratings on watch yet, but has had its second-highest rating on the country since 2011, in contrast to Fitch and Moody’s.
That year, S&P took a bold call to cut U.S. rating to “AA-plus” from its highest “AAA” even as a default was narrowly averted.
The agency cited heightened political polarization and insufficient steps to right the nation’s fiscal outlook for its decision.
On Thursday, DBRS Morningstar put the U.S. on review for a downgrade, warning of the implications of not reaching a deal soon.
Another agency, Scope Ratings, also placed its ‘AA’ rating for the U.S. under review earlier this month for a possible downgrade due to longer run risks associated with the debt ceiling.
(Reporting by Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)