The credit rating agency Fitch downgraded the credit rating of the United States by one grade, causing significant anger in the U.S.
The credit rating agency Fitch, one of the four major independent rating agencies in the financial market, downgraded the American credit rating by one grade due to "economic and political deterioration." The decision was taken by surprise at the White House and caused anger among American investors.
Following the rating agency's announcement, the dollar weakened in various markets, and several American investment companies experienced a decline in the prices of their traded stocks.
The decision to downgrade the American credit rating comes two months after a direct warning from several rating agencies, claiming that the conflict between Congress and the White House regarding the debt ceiling could harm the country's economic stability over time.
The American government received the decision with anger and confusion. Janet Yellen, the U.S. Treasury Secretary, explained that she "completely disagrees with Fitch's downgrade, which was done arbitrarily and based on outdated information."
The White House's response was less restrained, where they said in a briefing to reporters: "The administration strongly opposes the decision to downgrade the credit rating, it makes no sense to downgrade the United States just after President Biden implemented the most significant and successful economic recovery plan among all developed economies."
Investors use credit ratings to assess the level of risk in investing in a country or company. The lower the credit rating, the higher the investment risk, and it requires more significant investments to generate profits.
Kenny Lerner, Deputy Head of the investment firm "Truist" based in New York, explained that "the credit rating downgrade came as quite a surprise, and regarding its market implications, it is currently unclear. The market is sensitive to bad news, so we need to wait and see how things unfold."
The "Annual Treasury Rich Index" slightly increased with the announcement. This index calculates the average profit from investments over ten years, and its rise indicates a certain decline in investment profitability in the American market.
The American credit rating was previously affected due to conflicts over the debt ceiling, but now the American market is considered sensitive. The shake-up has already led to a certain decline in the American stock market, but the long-term impact is uncertain.
Several economic analysts at Wall Street firms expressed doubt that the announcement's impact on the credit rating will be significant and explained that: "Overall, it is likely that this announcement will be merely a footnote and will not have a significant effect on the American economy."
