Fitch Says U.S. ‘Very Likely’ to Resolve Debt Ceiling Limit

Fitch Ratings said U.S. lawmakers are “very likely” to raise the debt ceiling limit before Aug. 2, even as it reiterated that failure to do so would result in the country being placed on rating watch negative.

“The U.S. Treasury is saying that if the debt ceiling is not raised by Aug. 2, then they can’t guarantee that they will remain current on their obligations,” Andrew Colquhoun, head of Fitch’s Asia-Pacific Sovereigns team, said in an interview in Singapore today. “If the debt ceiling has not been raised by then, then we would put the U.S. sovereign ratings on rating watch negative. We think it’s very likely that the debt ceiling will be raised in good time.”

Treasury Secretary Timothy F. Geithner has warned that a failure to increase the $14.3 trillion debt ceiling by Aug. 2, the date he projects borrowing authority would be exhausted, may have catastrophic effects on the U.S. economy by sharply raising borrowing costs. Republicans are using the debt-ceiling talks to press for cuts in government spending.

Fitch rates U.S. sovereign debt AAA, the highest investment grade. Moody’s Investors Service said on June 2 that it expects to place the U.S. government’s top credit rating under review for a possible downgrade if there’s no progress on increasing the debt limit by mid-July. In April, Standard & Poor’s put the U.S. government on notice that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.

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