S&P may downgrade US AAA rating

| July 15, 2011 | 0 Comments

Standard & Poor’s (S&P) has warned it may lower the US triple-A debt rating if a deal to lift the Government’s $14.29 trillion borrowing limit is not agreed soon.

The news comes just one day after fellow ratings agency Moody’s said there is a risk of a possible downgrade.

Both warnings come as tense negotiations in Washington enter the fifth day but fail to reach an agreement on the issue.

President Obama needs the Republican lawmakers and Democratic-held Senate to agree to a deal to close the US deficit, while allowing Washington to borrow past the deadline of August 2 to ensure the US can meet its obligations.

S&P said: “Today’s CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days.”

Meanwhile, Fitch Ratings is maintaining its stable outlook on US debt and said it expects the debt ceiling to be raised by the deadline.

Finally, chairman of the Federal Reserve, Ben Bernanke, has warned that the US defaulting on its debt would cause a “major crisis”.

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