NEW YORK The U.S. may have avoided a possible debt default by passing a bill to raise the country's borrowing limit. But it might not enough to maintain its coveted AAA debt rating, according to Fitch Ratings.
On Tuesday, Fitch said the agreement to raise the debt ceiling and make spending cuts was an important first step but "not the end of the process." The rating agency said it wants to see a credible plan to reduce the budget deficit "to a level that would secure the United States' `AAA' status."
Tuesday afternoon, Moody's Investors Service confirmed the AAA government bond rating of the United States, but with a rating outlook of negative.
"The initial increase of the debt limit by $900 billion and the commitment to raise it by a further $1.2-1.5 trillion by yearend have virtually eliminated the risk of such a default,'' Moody's said in a statement, confirming the rating at AAA.
That just leaves S&P - the most important of the three to weigh in on the U.S. credit rating.
Fitch expects to conclude its review of the U.S. sovereign rating by the end of August. As the debt deal currently stands, it is possible the U.S. debt rating could be downgraded at that time, Fitch said.
David Riley, managing director at Fitch, said in an interview with The Associated Press: "There's more to be done in order to keep the rating in the medium-term."
Fitch is one of the three main ratings agencies that rate debt that is issued by countries, states, corporations and municipalities. Ratings are based on a likelihood of default. The AAA rating is the highest available and signifies an extremely low likelihood of default.
Standard & Poor's had yet to comment Tuesday. It had signaled in recent weeks that it might downgrade the country's debt rating to AA. Had the U.S. defaulted on its debt, a downgrade from all three agencies would have been likely, experts have said.
Riley said he was also worried about the weak economic reports released in the last few days. On Tuesday, the Commerce Department said that consumers cut their spending in June for the first time in nearly two years. On Monday, another report showed weakness in manufacturing. And last Friday's report that in the first half of the year the economy grew at its slowest pace since the recession ended in June 2009.