Aug 06, 2011 (LBO) – The long term credit rating of the United States of America has been downgraded by one notch to AA + with a negative outlook by Standard & Poors, a rating agency, which said policy making has become less ‘stable’.
At higher levels in the rating scale, policy takes on a greater importance.
Unless rulers cut spending as agreed with the congress, the rating agency said it may further downgrade US government credit.
“The outlook on the long-term rating is negative,” S & P said. “We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.”
S & P said a recent debate on cutting the deficit had dented confidence in US policy making and differences were wide.
“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed,” S & P said.
“The statutory debt ceiling and the threat of default have become political bargaining chips in