Credit rating agency Fitch on Wednesday placed the highest possible U.S. AAA rating “on review” due to risk of default, according to a statement. The move “reflects political tensions that are hampering resolution of the issue, such as raising or suspending the debt ceiling as the deadline rapidly approaches,” the organization said.
Congress must quickly raise the debt ceiling to avoid bankruptcy, which the US Treasury says could happen in nine days. This ceiling is currently $31 trillion. Fitch “expects” a timely resolution, the statement said. But experts believe “risks have increased that the debt ceiling will not be raised or suspended in time and that the government will start to fail to make some payments.”
President Joe Biden’s teams and Republican camp negotiators have yet to find a compromise. To vote in favor of a higher debt ceiling, the Republicans require a budgetary effort. Democrats also favor deficit reduction, but not in the same way. “Failure to reach an agreement […] would be a negative sign in terms of governance in general and the willingness of the United States to meet its obligations on time,” Fitch insisted.
The rating agency signals that it will be watching what happens closely: if the United States does not pay a debt due on June 1 or 2, it will be considered in default, and subsequent installments due within 30 days will become “Highly Risky” (CCC). Fitch notes, however, that for all other debt, the rating will remain unchanged, as the country holds the largest reserve of silver in the world.