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Standard & Poors warned late Thursday that there is a 50 per cent the credit rating agency would downgrade U.S. debt in the next 90 days.The agency first privately apprised U.S. officials of announcement, which comes a day after Moody’s issued a warning about the government’s AAA rating.
According to a statement, S&P said it placed U.S. debt on “CreditWatch with negative implications,” as negotiations to raise the debt limit continue.
The action “signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days,” the statement said. “The political debate about the U.S.’ fiscal stance and the related issue of the U.S. government debt ceiling has, in our view, only become more entangled.”
“We may lower the long-term rating on the U.S. by one or more notches into the ‘AA’ category in the next three months, if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future,” the statement added.
The agency said if Congress and President Barack Obama could agree on a $4 trillion deficit reduction deal — an increasingly unlikely scenario — then it may affirm the government’s AAA rating.
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