U.S. Top AAA Rating Affirmed by Fitch on Financial Flexibility

The U.S. AAA credit rating was affirmed by Fitch Ratings Inc., which cited the strength of the nation’s economy, capital markets and status as the issuer of the world’s reserve currency.

The U.S. budget deficit, which has narrowed from a peak of $1.4 trillion in 2009 to $483.3 billion in 2014, is expected to continue to shrink in 2015 and 2016, though reforms to mandatory spending and taxation measures will be needed to prevent increases after 2018, analysts Charles Seville and Ed Parker wrote in a report released Monday. Fitch said the outlook for the rating is stable.

Economic growth in the U.S. has been faster than that in most of the developed world, and the nation benefits from its diversity and technological advancement, bolstered by strong institutions and a favorable climate for business, Fitch said.

The country has been operating under a debt ceiling that was imposed on March 16, which prevents the government from adding to its total borrowing. While Fitch expects Congress to raise the level, that action may come “close to” the period in October, when the Obama administration will exhaust the “extraordinary measures” it has at its disposal to raise money to meet obligations without adding to the debt, Fitch said.

Standard & Poor’s cut the U.S. rating in 2011 for the first time amid political wrangling about spending measures and the debt limit.

Investors routinely ignore ratings companies’ decisions. In almost half the instances, yields on government bonds fall when a rating action by Moody’s Investors Service Inc. and S&P suggests they should climb, or they increase even as a change signals a decline, according to data compiled in 2012 by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as the 1970s. When S&P downgraded the U.S. government in August 2011, bonds rose and pushed Treasury yields down to records.

Moody’s ranks the U.S. at its highest credit rating, while S&P has the U.S. at AA+, its second-highest rating.

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