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Fitch puts U.S. credit rating on negative watch

WASHINGTON — The Fitch credit rating agency has warned that it is reviewing the U.S. government's AAA credit rating for a possible downgrade, citing the impasse in Washington that has raised the threat of a default on the nation's debt.

Fitch placed the U.S. credit rating on negative watch Tuesday, a step that would precede an actual downgrade. The agency said it expects to conclude its review within six months.

Fitch says it expects the debt limit to be raised soon. But it adds, "The political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default."

A Treasury Department response said Fitch's announcement "reflects the urgency with which Congress should act to remove the threat of default hanging over the economy."

Dow Jones Industrial futures were essentially unchanged Tuesday evening. Fitch made its announcement after financial markets had closed.

Fitch is one of the three leading U.S. credit rating agencies, along with Standard & Poor's and Moody's Investors Service.

S&P downgraded U.S. long-term debt to "AA+" in August 2011. But three months ago, it raised its outlook. That was in part because of tax increases and spending cuts that have helped shrink the budget deficit. S&P has said it's unlikely to change its rating because of the debt-limit fight.

Moody's said last week that even if Congress failed to raise the limit by Thursday, Treasury could make its interest payments ahead of other bills, "leaving its creditworthiness intact."

Fitch took a dimmer view Tuesday. It said Treasury might not be able to prioritize its interest payments. "It is unclear whether it even has the legal authority to do so," Fitch said.

A credit rating is an assessment of how able a country or company is to repay the money it has borrowed. A rating of AAA lets companies and governments borrow at super-low rates.

Fitch puts U.S. credit rating on negative watch 10/15/13 [Last modified: Tuesday, October 15, 2013 11:31pm]
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