**Yellen Slams Fitch Ratings Decision to Strip US of Top Credit Rating**
Treasury Secretary Janet Yellen strongly criticized Fitch Ratings’ recent decision to remove the United States from its top-tier credit rating. Yellen referred to the move as “flawed” and “entirely unwarranted.” She emphasized the economic strength of the United States and stated that it remains the world’s largest, most dynamic, and most innovative economy, with the strongest financial system globally.
Yellen’s criticism echoes the sentiment expressed by her predecessor, Timothy Geithner, 12 years ago when S&P Global Ratings became the first of the three major ratings firms to downgrade the US from AAA to AA+. However, Moody’s Investors Service remains the only agency that still maintains the highest credit rating for the US.
**Reasons Behind Fitch Ratings’ Downgrade and Market Reactions**
Fitch Ratings downgraded the US to AA+ due to concerns over financial governance erosion, rising budget deficits, and expected fiscal deterioration over the next three years. The announcement had little immediate impact on Treasuries but led to a slide in their value following stronger-than-expected jobs data. The market downturn was further fueled by the announcement of increased US debt issuance.
Fitch analysts highlighted medium-term fiscal challenges that have remained unaddressed. In contrast, Yellen expressed optimism regarding the longer-term debt outlook and stated that inflation-adjusted interest costs are not historically high. Fitch also projected that the US would experience a mild recession in late 2023, a prediction that contradicts the assessments of many economists. Bank of America Corp. recently reversed its own forecast for a recession, becoming the first large Wall Street bank to do so.
**Yellen Affirms the Strength of Treasury Securities and American Economy**
Despite Fitch Ratings’ decision, Yellen emphasized that treasury securities continue to be the world’s leading safe and liquid asset. She further stated that the American economy remains fundamentally strong.
Yellen’s colleague, Treasury Assistant Secretary for Financial Markets Josh Frost, downplayed any concerns about forced selling by investors following the downgrade. He noted that there was no evidence of such selling during the 2011 S&P event and highlighted the robust demand for Treasury securities that continues to exist.
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