Just when we thought the debt ceiling issue was behind us, Fitch ratings officially lowered the U.S. government’s debt rating from its highest level of AAA to AA+, with a “stable outlook.” Just two months ago, before the latest debt ceiling showdown was resolved, Fitch had warned this was a possibility.
Fitch noted three primary reasons for the downgrade: growing budget deficits, a high and growing debt level and deteriorating governance.
Other countries have AAA rates, while a host do not:
United States AA+
Source: World Government Bonds. Data as of August 2, 2023.
The bigger risk for the U.S. government and the overall economy is much more simple: higher interest rates. As rates stay higher for longer, the Treasury must roll existing debt into higher cost debt, which then becomes a drain on the budget.
Fitch lowers U.S. Ratings. What should you do?
August 03, 2023