S&P strips US of 'AAA' rating
LALIT K JHA/PTI
Washington, Aug 6: Raising concerns over the creditworthiness of the world's largest economy, Standard and Poor's has downgraded sovereign rating of the US from the top-most 'AAA' level for the first time in history -- a move that could make the debt-ridden nation's borrowings costlier.
The downgrade is likely to have significant adverse impact on the US and overseas markets including India, and has raised questions about the recovery of the US economy, which is already feared to be moving towards another recession.
Announcing the unprecedented move of downgrading the long-term sovereign credit rating of the US a notch lower from 'AAA' to 'AA+', the rating agency major said it considers the efforts being made by the administration to tackle soaring debt levels as inadequate.
S&P warned of even further downgrading it to 'AA' level, while assigning a negative outlook on the current rating.
"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned...," the agency said.
Taken aback by the downgrade, the US administration appeared to be questioning the analysis of the rating agency saying it was way off the mark.
The US President Barack Obama met the Treasury Secretary Timothy Geithner before leaving for Camp David last afternoon and the officials of the Department of Treasury said the decision of S&P to downgrade US's rating was flawed.
It was claimed by treasury officials that S&P had erroneously inflated the US deficits by over USD two trillion and the agency rectified the error after being alerted. Other prominent credit rating agencies - Moody's Investors Service and Fitch Ratings - has so far affirmed their 'AAA' credit ratings.
However, Moody's and Fitch said that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens.
The downgrade is being seen as a big embarrassment for the administration, as it has come within a week of President Barack Obama signing a bill to end the debt-ceiling impasse that had pushed the Treasury to the edge of default.
Lastupdate on : Sat, 6 Aug 2011 21:30:00 Makkah time
Lastupdate on : Sat, 6 Aug 2011 18:30:00 GMT
Lastupdate on : Sun, 7 Aug 2011 00:00:00 IST
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