LONDON (Reuters) - The United States was put on review for a downgrade by credit rating agency DBRS Morningstar on Thursday over Washington’s debt ceiling haggling, shortly after a similar warning from Fitch.
“The Under Review with Negative Implications reflects the risk of Congress failing to increase or suspend the debt ceiling in a timely manner,” DBRS said in a statement.
“If Congress does not act, the U.S. federal government will not be able to pay all of its obligations,” it added.
The DBRS move follows a similar action by Fitch, which on Wednesday said its ‘AAA’ rating for the Unites States was on negative watch, a precursor to a possible downgrade should lawmakers fail to raise the government’s borrowing cap before it runs out of money, which could happen as soon as next week.
Another agency, Scope Ratings, placed its United States ‘AA’ rating under review earlier this month for a possible downgrade due to longer run risks associated with the debt ceiling.
Negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy held what both sides called productive talks on Wednesday to try to reach a deal to raise the $31.4 trillion debt ceiling.
But a June 1 deadline indicated by the Treasury means investor concerns are mounting that there may not be sufficient time to finalise an agreement and avoid a catastrophic default.
DBRS, which has a triple A rating for the United States, said it still expected Congress to raise the debt limit in time but warned of the risk of “Congressional inaction” as the deadline approaches.
It also cautioned that even in the event of a resolution, the prospect of repeated legislative stand-offs in a “polarized political environment” could lead to a credit rating downgrade.