Downgrade of America’s AAA rating still likely

Aug 1, 2011

Business Digest: Despite last-minute debt deal, economists expect the credit rating agencies to act

The US Congress may be on the brink of passing a last-minute deal on debt, but that doesn't mean that America won't still lose its triple-A credit rating. According to the Guardian, the downgrade could happen by the end of the week.

Despite an initial £3 trillion of budget cuts being agreed by the Senate, the move may not meet the significant changes Standard & Poor's had warned were needed for the US to keep its top credit rating.

Senior economists appeared to agree. "We have one rating agency out there [S&P] that said it would downgrade unless certain things happen, and these things are not happening fast enough," explained Mohamed El-Erian, head of the world's largest bond investor.

Julian Jessop, chief international economist at Capital Economics, also agreed. "It looks like they will get a deal done, but it looks like none of the numbers are going to reassure the debt rating agencies," he said. Unless the agencies give the States time to forge a long term deal, Jessop continued, "I'm pretty sure America will lose its triple-A rating."

Read a full report at the Guardian.

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