Janet Yellen, the U.S. Secretary of the Treasury, has strongly disagreed with the decision of international credit rating agency Fitch Ratings to downgrade its credit rating from “AAA” to “AA+”.
In response to the recent announcement by the rating agency, which has sparked debate among analysts, economists, financial experts, and government officials in the U.S. and other places in the world, Yellen issued a press statement on Tuesday registering her displeasure over the agency’s decision to cut the U.S. credit rating.
The Secretary of State, like several other economists in the U.S., had called out the agency for using a quantitative rating model that had not only declined significantly but lost relevance in global competitive evaluation.
She said, “I strongly disagree with Fitch Ratings’ decision. The change by Fitch Ratings announced today is arbitrary and based on outdated data. Fitch’s quantitative ratings model declined markedly between 2018 and 2020, and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision.
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“Many of these measures, including those related to governance, have shown improvement over the course of this Administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America’s competitiveness.”
The decision, which has also generated condemnation from the administration of President Joe Biden, said that the agency failed to highlight the several improvements in various measures, including those related to governance, that have been made.
They cited the passage of bipartisan legislation aimed at addressing the debt limit and making investments in infrastructure and America’s competitiveness as positive developments during their tenure.
Yellen added that “Fitch’s decision does not change what Americans, investors, and people all around the world already know: that Treasury securities remain the world’s preeminent safe and liquid asset and that the American economy is fundamentally strong.”
She pointed out how, in the past, the world’s biggest economy had undergone a fast economic recovery from a deep recession.
She backed up her point of view of how resilient the U.S. economy has been, especially as the unemployment rate nears historic lows and inflation is coming down significantly. She said, “Last week’s report showed that the U.S. economy continues to grow,” and she cannot fathom why the agency decided to cut its rating from “AAA” to “AA+”.
She noted, “The American economy remains the world’s largest and most dynamic economy, with the deepest and most liquid financial markets in the world. To build on this, President Biden and I have been focused on making critical investments in our country’s core economic strength and productive capacity.
“President Biden and I are committed to fiscal sustainability. The most recent debt limit legislation included over $1 trillion in deficit reduction and improved our fiscal trajectory. Looking forward, President Biden has put forward a budget that would reduce the deficit by $2.6 trillion over the next decade through a balanced approach that would support investments for the long term.”
