After the congressional supercommittee failed to find common ground for budget cuts, Fitch Ratings, the last agency to rate the U.S. outlook as stable, downgraded it on Monday to negative.
The U.S. still retains its triple-A credit rating from Fitch, although the agency cited “declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path will be forthcoming” as its reason for the change in outlook. The change, according to the agency, makes the probability of a downgrade higher than 50% within the next two years.
Bloomberg reported that David Riley, Fitch’s head of sovereign ratings in London, called the supercommittee’s failure “a missed opportunity,” adding, “The scale of any subsequent budget cuts are probably going to have to be larger than they otherwise would have been and certainly implemented in a faster manner.”
The company also said that a congressional failure to agree on a “credible deficit reduction plan” combined with a “worsening” economic and fiscal outlook would probably end up with the U.S. losing its triple-A ranking. It added, “Further deficit reduction will not be credible if it relies solely on further cuts in discretionary spending rather than reform to entitlements and taxation.”