Fitch’s downgrade of the US economy is seen as strange and bizarre, according to top officials and analysts.

Fitch's downgrade of the US economy is seen as strange and bizarre, according to top officials and analysts.

Fitch’s Downgrade of US Sovereign Credit Rating Sparks Controversy

In a surprising move, Fitch Ratings recently downgraded the long-term credit rating of the United States from the top-tier AAA rating to AA+. The agency cited a “steady deterioration in standards of governance over the last 20 years” as the primary reason for this downgrade. However, top officials and economists have vehemently criticized Fitch’s decision, labeling it as bizarre and outdated.

Treasury Secretary Janet Yellen led the charge in criticizing Fitch’s attack on the US credit rating. Yellen argued that the downgrade was arbitrary and based on outdated data from 2018 to 2020, neglecting recent improvements in economic indicators. She pointed out that the economy has been gathering momentum and that the indicators have shown significant progress since the period referenced by Fitch.

Nobel laureate and highly respected economist, Paul Krugman, also expressed his bewilderment at Fitch’s downgrade. In a post on X, he referred to it as a “bizarre Fitch downgrade” and highlighted the tremendous success of the US in reducing inflation without experiencing a recession. Krugman’s view is that these positive economic developments, coupled with the potential advantages of immigration and increased productivity due to artificial intelligence, improve the long-term economic prospects of the country.

Mohamed El-Erian, Allianz’s chief economic adviser and former CEO of Pimco, echoed the sentiment of disbelief regarding Fitch’s decision. He referred to the downgrade as a “strange move” and expressed his puzzlement with several aspects of their announcement, including its timing. El-Erian believed that Fitch’s decision is unlikely to have a lasting disruptive impact on the US economy and markets.

Former Treasury Secretary Larry Summers went a step further in criticizing Fitch’s downgrade, describing it as “bizarre and inept.” Summers pointed out that the decision is particularly perplexing considering the strength of the American economy, which has outperformed expectations.

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Fitch had previously highlighted the risk of a credit rating downgrade for the US in May, citing political “brinksmanship” during negotiations over raising the country’s debt ceiling. However, the US managed to avert a default when President Biden signed a bill on June 3 to lift the debt ceiling, avoiding a potentially catastrophic economic event.

Following Fitch’s downgrade, US stock futures experienced a modest decline, with the Dow Jones Industrial Average futures dropping by 0.2% and S&P 500 and Nasdaq 100 futures dipping by 0.3% and 0.4%, respectively.

Despite the controversy sparked by Fitch’s decision, the agency has not responded to requests for comment, leaving many wondering about their rationale and further insights into their decision-making process.

In conclusion, the downgrade of the US sovereign credit rating by Fitch Ratings has generated intense debate and strong criticism from top officials and economists. While Fitch cited a deterioration in governance standards, critics argue that the decision overlooks recent positive economic developments. The impact of this downgrade on the US economy and markets remains to be seen.

• Economy
• Fitch
• united states