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Ex-Secretary of the Treasury Larry Summers and economic experts slam Fitch's downgrade of US' credit rating
Fitch has downgraded United States' sovereign top-tier credit rating from AAA to AA+.
Former United States Secretary of the Treasury Larry Summers has slammed Fitch's move to downgrade the country's sovereign top-tier credit rating from AAA to AA+. The rating agency has cut the government's rating citing ballooning debt load and political turmoil in Washington.
“The United States faces serious long-run fiscal challenges. But the decision of a credit rating agency today, as the economy looks stronger than expected, to downgrade the United States is bizarre and inept,” tweeted Summers.
In an interview with Bloomberg, Summers told that “the idea that this is creating the risk of a default on US Treasury securities is absurd, and I don’t think that Fitch has any new and useful insights into the situation.”
Summers also reacted to Fitch's prediction about the US economy slipping into a mild recession from the fourth quarter of this year into the first quarter of 2024.
“If anything, the data in the last couple of months has been that the economy is stronger than what people thought, which is good for the creditworthiness of US debt,” said Summers.
Other economic experts also reacted to the move by Fitch. Mohamed El-Erian, chief economic adviser to financial services company Allianz SE, called the downgrade “a strange move.”
“I am very puzzled by many aspects of this announcement, as well as by the timing. Overall, this announcement is much more likely to be dismissed than have a lasting disruptive impact on the US economy and markets,” tweeted El-Erian.
Economist Paul Krugman tweeted “The biggest economic news over the past year has been America’s remarkable success at getting inflation down without a recession."
“Maybe the important thing to realize is that when it comes to sovereign debt, rating agencies have no inside information (and a lousy track record). Remember when S&P downgraded America in 2011? Neither do I,” he added.
Notably, Fitch has cited US government's recent efforts to tackle the country's rising debt limit. Recently, President Joe Biden lifted the government's $31.4 trillion debt ceiling.
