The United States of America currently boasts a remarkable AAA credit rating, however Fitch, one of the leading credit rating agencies of the U.S. has recently indicated that the Washington government’s standoff has raised the risk of a default.
The credit rating agency has placed the U.S. on negative watch, which is seen as the preceding step just before a possible downgrade.
The announcement comes at a difficult time, as both Washington and the nation are desperate for some good news on the country’s debt struggle.
Fitch made the announcement the stock market closed, therefore short term implications of the move remain unknown.
A credit rating indicates the trust of the market, showing how capable a country or company is in repaying its debts. The AAA rating is obviously at the top end of this scale.
As Jack Albin, chief investment officer of BMO Private Bank put it, Fitch’s warning meant little surprise to the market. According to Mr. Albin, a company’s or government’s credit rating consists of two deciding factors: the ability to pay the debt, and the willingness of doing so.
Right now no one is questioning the U.S. government the ability, however willingness is a virtue, which so far seems to be missing in Washington.