The United States is unlikely to keep hold of its AAA credit rating even if its government agree to raise its debt ceiling by the August 2 deadline, according to economic research consultancy Capital Economics.
The US Treasury has warned that the government will run out of money to pay its bills unless the £8.7trn borrowing limit is increased by Tuesday.
A vote on the Republican bill to raise the debt ceiling was delayed on Thursday.
In a note published today, Capital Economics says the US will avoid default but will probably still lose its AAA credit rating, possibly as soon a next week.
It says a downgrade could be avoided if US politicians make cuts of up to $4trn over the next 10 years, but says this is unlikely at the present time.
It says: “It is increasingly hard to see how the US government can keep its AAA credit rating. Based largely on comments from S&P, this would require the politicians to agree a deficit reduction package containing spending cuts and tax increases worth at least $3trn and perhaps as much as $4trn over the next ten years. None of the current proposals come close enough to this.”