Fitch Ratings on Tuesday slashed its credit rating of the United States by one step to AA+ from AAA.
The rating has a stable outlook, indicating that Fitch does not expect further changes.
More than a decade ago, S&P cut its rating of the U.S. to an equivalent AA+.
Moody’s still retains the top grade for the U.S.
“The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions,” Fitch said in its statement explaining the downgrade.
Fitch said that it expects “tighter credit conditions, weakening business investment, and a slowdown in consumption will push the U.S. economy into a mild recession” in the final quarter of this year and the first quarter of next year. The ratings agency expects another interest rate hike by the Fed in September.
“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025. The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” the ratings agency said.