U.S. likely to lose `AAA` rating, say economists

U.S. likely to lose `AAA` rating, say economists

July 26, 2011 / 11:50 PM IST

LONDON (Reuters) - The United States will lose its top-notch "AAA" credit rating from at least one of the major ratings agencies, said a slim majority of economists in a Reuters poll that also found wrangling over the debt ceiling has damaged the economy.

Even though the poll showed only a one in five chance of another recession in the next year, 30 out of 53 economists surveyed over the past two days said the U.S. will lose its AAA credit rating from one of the three big ratings agencies -- Standard & Poor's, Moody's and Fitch.

President Barack Obama's Democrats and their Republican rivals have one week left to agree a deficit-cutting plan in exchange for a hike in the legal debt limit, or risk a potentially devastating government debt default in August.

"We believe that Congress will act with an 11th hour deal to raise the debt ceiling. However, the risk of that deal failing increases with each passing day," said Guy LeBas, director at Janney Capital Markets.

"I would say that the chance of a U.S. ratings downgrade is now more likely than not."


Economists put the probability of a debt default at a median 5 percent, although the mean average was 13 percent. Forecasts ranged from no chance to a 65 percent probability.

But even if this worst-case scenario is not borne out, a firm majority of respondents -- 38 out of 54 -- said the political wrangling over the debt ceiling has already damaged the U.S. economy.

(Reporting by Andy Bruce, Polling by Bangalore Polling Unit; Editing by Ruth Pitchford)

TAGS: #Wire News
first published: Jul 26, 2011 11:50 pm

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