Rating agency goes negative on the American outlook
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Standard & Poor’s has cut its credit rating outlook for the US from stable to negative.
It says the US must address its ballooning budget by 2013 to hold on to its coveted AAA rating. It says: “There is a material risk that US policymakers might not reach an agreement on how to address med- ium and long-term budgetary challenges by 2013.
“If an agreement is not rea-ched and meaningful implementation does not begin by then, this would in our view render the US fiscal profile meaningfully weaker than that of peer AAA sovereigns.”
S&P says that despite “exceptional strengths”, the US fiscal position has “deteriorated steadily” in the last decade, particularly in the wake of the financial crisis.
S&P says recent Democrat and Republican proposals to rein in the budget represent only “the starting point of a process aimed at broader engagement”. It says: “We see the path to agreement as challenging because the gap between the parties remains wide.”
Bestinvest senior investment adviser Adrian Lowcock says: “This is unsurprising as both S&P and Moody’s threatened to review the US credit rating 12 months ago if it did not address the debt. This, in effect, will kill off further possibility for quantitative easing and puts the emphasis on to financial discipline.”
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