'It's not going to have a material effect on the things that really matter' - analyst on Fitch

Record ID: 1736550

  • Title: 'It's not going to have a material effect on the things that really matter' - analyst on Fitch
  • Date: 2nd August 2023
  • Summary: WASHINGTON, D.C., UNITED STATES (AUGUST 2, 2023) (REUTERS) (SOUNDBITE) (English) SENIOR ECONOMIST AT MORNING CONSULT, KAYLA BRUUN, SAYING: "The bigger factors that matter for the trajectory of the U.S. economy isn't so much the rating, the rating is more an opinion on what Fitch thinks is going to happen and how that plays into the U.S.'s ability to honor its debts. In terms of the trajectory of the economy, what I'm really watching is more what's happening with the labor market, what's happening with consumer spending, what's happening with business investment, all these components that filter into top line growth and keep the engine running, and those are generally not too dependent on the rating. So in terms of just going from the very top rating to still a very, very, very strong rating, it's not going to have a material effect on the things that really matter and determine the path of, are we going to have this soft landing or not." BEIJING, CHINA (RECENT - JULY 7, 2023) (REUTERS) U.S. TREASURY SECRETARY, JANET YELLEN, SPEAKING (NOT A SOUNDBITE) WASHINGTON, D.C., UNITED STATES (AUGUST 2, 2023) (REUTERS) (SOUNDBITE) (English) SENIOR ECONOMIST AT MORNING CONSULT, KAYLA BRUUN, SAYING: "Looking beyond the few days or weeks when this rating change is really on investors' minds, a lot is going to depend on whether the economy really does look like it's going to stick its soft landing. It'll also depend a lot on what happens with interest rates, that makes a huge difference in where investments are placed and business investment and just growth in companies and the labor market, etc. There's a lot of macroeconomic factors that are going to determine what happens to the stock market over the coming year, and there's certainly a lot of headwinds. We are seeing a gradual slowdown in spending. We're seeing a slowdown in hiring, though the labor market does remain strong. So what we really are trying to see is whether timing works out so that the economy slows just enough. We want a little bit of a Goldilocks situation. We want it to slow just enough that the Fed can stop increasing the pressure on interest rates to slow inflation, but also not cool so much that we have prolonged unemployment and other factors that would contribute to declaring an official recession."
  • Embargoed: 16th August 2023 19:54
  • Keywords: Biden Fitch Fitch Ratings White House Yellen credit rating debt ceiling downgrade
  • Location: VARIOUS
  • City: VARIOUS
  • Country: US
  • Topics: Economic Events,North America,Equities Markets
  • Reuters ID: LVA00A181602082023RP1
  • Aspect Ratio: 16:9
  • Story Text:Fitch downgraded the U.S. credit rating due to fiscal concerns, a deterioration in U.S governance, as well as political polarization reflected partly by the Jan. 6 insurrection, Fitch Ratings said on Wednesday (August 2).
    In a move that took investors by surprise, Fitch downgraded the United States to AA+ from AAA on Tuesday (August 1), citing fiscal deterioration over the next three years and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.
    The agency based its decision in part on a perceived deterioration in U.S. governance, which it said gave less confidence in the government’s ability to address fiscal and debt issues.
    That deterioration, as well as increased polarization in the country’s political climate, was visible in the Jan. 6 insurrection, which the agency highlighted in meetings with the Treasury ahead of the downgrade.
    Fitch, which is owned by media group Hearst, is the second major rating agency to strip the United States of its triple-A rating, after Standard & Poor’s did so in 2011.
    S&P officials who made that seminal call more than a decade ago recently told Reuters they felt vindicated in their decision to cut the U.S. pristine rating, which they said at the time was due to heightened political polarization and insufficient steps to right the nation's fiscal outlook.
    (Production: Kyoko Gasha, Roselle Chen)
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