Fitch affirms United States’ ratings at ‘AA ‘, outlook ‘stable’, despite projected slowdown in 2024

Credit ratings agency Fitch on March 1 assured that United States’ long-term foreign currency sovereign credit rating at “AA ” with a “stable” outlook.

Fitch forecasted the country’s gross domestic product growth to slowdown in 2024, despite its economy proving resilient in the face of higher interest rates.

The US economy grew by 2.5 per cent in 2023, partly reflecting the renewed fiscal policy easing as highlighted by the large general government (GG) deficit in 2023.

Fitch, a credit rating agency, expects the US government deficit to improve slightly in 2024, narrowing to 8 per cent of GDP from 8.8 per cent in 2023. This forecast is based on anticipated factors including rising government revenue, reduced spending compared to 2023, and the absence of a repeat of the large one-off spending on deposit insurance seen in 2023.

“The interest burden, however, will continue to grow given the higher debt burden and impact of higher rates,” Fitch added.

According to the agency, the outcome of the upcoming November presidential and congressional elections will be important for policymaking and the ability to pass and implement legislation.

In November, peer Moody’s lowered the outlook on the country’s credit rating to “negative”, citing large fiscal deficits and a decline in debt affordability.

Meanwhile, Fitch Ratings also downgraded New York Community Bancorp and its bank subsidiary Flagstar Bank to ‘BB “https://www.livemint.com/”B’ from ‘BBB-“https://www.livemint.com/”F3’.

Building on a previous downgrade in February, Fitch Ratings further adjusted New York Community Bancorp’s (NYCB) credit rating in early March.

This recent downgrade reflects a reassessment of NYCB’s risk profile following the company’s revelation of a critical weakness in internal loan review controls. Fitch also assigned a negative outlook, indicating a potential for further downgrades.

This decision joined similar actions by other firms like Moody’s and Morningstar DBRS, both of which have downgraded NYCB’s ratings due to concerns surrounding its significant exposure to commercial real estate (CRE). Despite the overall negative assessment, Fitch did acknowledge the potentially positive impact of the newly appointed CEO, Alessandro Dinello, given his prior experience leading Flagstar Bancorp.

(With Inputs from Reuters)