November 29, 2011
Fitch Ratings kept its pristine AAA rating on the U.S. on Monday, but the credit-ratings company downgraded its outlook to “negative” in the wake of the Supercommittee’s failure to find $1.2 trillion in spending cuts.
The development, which had been hinted at last week, could have been worse for the U.S. as McGraw-Hill’s (MHP: 41.37, +0.17, +0.41%) Standard & Poor’s slashed its credit rating for the first time ever in August.
However, the negative outlook indicates a “slightly greater” than 50% chance that Fitch downgrades the U.S. over the next two years.
“Failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade of the U.S. sovereign rating,” David Riley, a managing director at Fitch, said in the report.
Fitch warned that its revised fiscal projections call for federal debt held by the public to exceed 90% of gross domestic product and debt interest payments making up more than 20% of total tax revenues by the end of the decade.
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