Fitch Ratings last night affirmed its AAA credit rating on the US and maintained a negative outlook.
The rating agency cited a diversified and wealthy economy that is undermined by the government's inability to agree on deficit reduction measures.
"The uncertainty over tax and spending policies associated with the so-called 'fiscal cliff' weighs on the near-term economic outlook," Fitch said.
A negative outlook gives Fitch 12 to 18 months by which it is expected to make a decision on the US credit, pushing a decision well beyond the next presidential & congressional elections.
Nearly a year ago, rival credit rating agency Standard & Poor's made an historic cut to the US rating, dropping it by one notch to AA-plus. Moody's Investors Service holds the US rating at Aaa. All three agencies have negative outlooks with decisions by S&P and Moody's not expected until at least 2013.
Additional risks to the US credit outlook, Fitch said, emanate from the uncertain US fiscal policy as well as Europe's debt crisis and recession.
It also highlighted the diminished capacity of US fiscal and monetary stimulus, referring to the near zero interest rate policy instituted by the US Federal Reserve that is expected to remain in place until late 2014.
"In Fitch's opinion, it is likely that all or some of the tax increases and spending cuts implied under current law will be voided or at least temporarily deferred.
Fitch's fiscal and economic forecasts are premised on a reduction in the federal budget deficit of around 1.5% of GDP in 2013 rather than the 3-5% contraction implied by the 'fiscal cliff'. It is forecasting a US economic growth rate of 2.6% in 2013 with unemployment falling below 8%.
