Fitch, please! Why Fitch lowered the US credit rating

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 2 August 2023

⏱️ 9 minutes

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Summary

The credit rating agency, Fitch, caused a stir yesterday when it downgraded the United States' credit rating from AAA to AA plus. This came less than a week since Federal Reserve staff stopped forecasting a recession on the horizon.

So what gives? Today, we talk to an economist to break down the reasons why Fitch no longer views the US as among the safest of bets.

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Transcript

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0:00.0	NPR.
0:12.0	Today the financial world is feeling a little unsettled, and that's because the United States
0:17.6	stellar creditworthiness is being questioned by one of the three main ratings agencies.
0:23.8	So when banks or investors weigh up whether or not they want to buy a government debt,
0:28.6	they turned to these rating agencies, which essentially give a credit score to governments
0:33.2	around the world.
0:35.0	And late on Tuesday afternoon, Fitch unleashed a financial earthquake.
0:40.0	It downgraded American government debt from AAA to AA+.
0:45.8	Now that is still very low default risk, and these ratings argue be matter less for a huge
0:52.6	widely traded market as the one for US Treasuries.
0:56.9	But because US government debt, US Treasuries are held all around the world, the implications
1:03.8	could be worrying.
1:08.8	This is the indicator from Planet Money, I'm Darian Woods, today on the show, the US Credit
1:13.3	Rating Downgrade, what's behind it, what it could mean for the economy, and why now.
1:23.6	Our expert to guide us through the US Credit Rating Downgrade is Kerala Binder.
1:31.4	Kerala is an associate professor of economics at Haverford College, and to be honest, the
1:36.5	big credit rating downgrade was only the second biggest news in her household.
1:41.6	Yeah, I'm good.
1:42.6	I actually just had a baby two days ago on Milton Friedman's birthday, so it's an exciting
1:47.0	time over here.
1:48.0	Oh my gosh.
1:49.0	Yeah.
	...

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