Fitch puts US credit rating on negative watch

International credit rating agency Fitch Ratings has placed the US’s “AAA” credit rating on negative watch due to the debt limit impasse. In a statement, Fitch said, the decision reflects the increasing political partisanship that has prevented a decision to increase or suspend the debt limit, despite the federal government reaching its $31.4 trillion debt limit and the Treasury Department running out of extraordinary measures to prevent the debt limit from being exceeded and facing a cash shortage shortly. In the statement, it was announced that the US’s long-term foreign exchange credit rating of “AAA” has been placed on negative watch. The statement stated that Fitch expects the debt limit issue to be resolved before the date (X-date) when the US Treasury will exhaust its cash position and capacity to take extraordinary measures. “However, we believe there are increasing risks that the debt limit will not be increased or suspended before X-date and that the government may begin to delay payments on some of its obligations as a result.” The statement noted that the escalation of tensions over the debt limit, and the failure of US authorities to meaningfully address medium-term fiscal challenges that will lead to rising budget deficits and a rising debt burden, indicate downside risks to US creditworthiness. The US reached its $31.4 trillion debt limit on January 19, and the US Treasury began taking extraordinary measures to avoid exceeding the limit. The Treasury Department had warned that these extraordinary measures could run out as early as June 1. Despite the approaching date, no agreement has yet been reached between the White House and Republicans in negotiations to increase the budget limit.