Fitch Follows S&P's Lead: United States Loses Coveted AAA Credit Rating, but Impact Expected to be Minor

Fitch, one of the top-three global ratings agencies, has downgraded the credit rating of the United States from AAA to AA , following in the footsteps of S&P Global who downgraded the US in 2011. A AAA credit rating is the highest rating that an agency gives to a country, and it denotes the highest level of creditworthiness. The ratings are intended to reflect the economic and financial health of a borrower, taking into account factors such as economic growth, tax revenue, government spending, deficits, and debt levels.

The loss of a AAA rating is largely symbolic and unlikely to have an immediate impact on the US economy, as the country still enjoys the confidence of markets and its debt is a critical part of the global financial system. Only a small group of nations have a AAA rating from all three major ratings agencies, including Australia, Denmark, Germany, Luxembourg, the Netherlands, Norway, Singapore, and Switzerland. Several others, such as the US, Canada, and the European Union, have an AAA rating from one or two of the agencies.

The downgrade by Fitch is unlikely to cause a significant sell-off of US Treasuries or prompt a major shift in investor behavior, as investors have experienced a similar downgrade from S&P in 2011 and came away unscathed. However, analysts note that the US still faces serious fiscal challenges, including the growing debt burden and sharp political divisions, which could become unsustainable if the Federal Reserve is unable to lower interest rates. Overall, the impact of the downgrade on the US economy is expected to be minimal.