Outlook Revised From Negative to Stable on "Receding Fiscal Risks"

Standard and Poors - US Ratings AA plusStandard and Poor's, which shocked the world by downgrading the United States of America's credit rating in August of 2011, revised their credit outlook on the nation from "negative" to "stable" earlier today.

Standard and Poor's currently has a AA+ long-term credit rating for the United States. As mentioned, the company downgraded the US from a pristine AAA rating in August of 2011, shortly after the "conclusion" of the debt ceiling crisis.

What does it mean if Standard and Poor's is revising their outlook on the United States' credit rating from negative to stable?

A country or company being placed on "negative watch" means that there is a good chance of a downgrade occurring over the next 6-24 months.

A country or company moving from "negative" to "stable" means that there is a much lower chance of a downgrade occurring over the near-term. According to Standard and Poor's, the chance of a near-term downgrade of the United States of America's credit rating currently sits at less than 33%.


So why did Standard and Poor's lift their outlook for the United States?

A number of reasons, including:

1) the country possesses a well-diversified and resilient economy

2) the country's monetary authorities have "both the strong ability and willingness to support sustainable economic growth and to attenuate major economic or financial shocks"

3) the country has "generally strong" governmental institutions and policymaking

4) the likelihood that the Republicans and Democrats will reach a deal near the 2013 fiscal year-end that will raise the debt ceiling and not result in a "sudden unplanned contraction in current spending"

5) stronger-than-expected private sector contributions and increased "remittances to the government by the government-sponsored enterprises Fannie Mae and Freddie Mac" will result in reduced deficits going forward, which will give "policymakers some additional time to take steps to address pent-up age-related spending pressures"


Source: GlobalCreditPortal.com - United States of America 'AA+/A-1+' Ratings Affirmed; Outlook Revised to Stable on Receding Fiscal Risks

Filed under: General Knowledge

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