Fitch Maintains U.S. Credit Rating at ‘AA+’ with Stable Outlook
Fitch affirmed the sovereign credit rating for the United States at “AA+” with a stable outlook, citing its large economy, high per capita income, and the U.S. dollar’s status in the global economy.
According to the rating note, the U.S. ‘AA+’ rating is supported by its large economy, high per-capita income, dynamic business environment and exceptional financing flexibility due to the U.S. dollar’s role as the preeminent global reserve currency.
However, high fiscal deficits, a substantial interest burden, and high and rising government debt levels constrain the rating. Debt is more than double the ‘AA’ rating median.
The government has not taken meaningful actions to address the large general government (GG) fiscal deficits -averaging 7% of GDP since 2022-, and spending pressures will mount over the next decade due to an ageing population.
Despite higher tariffs, government spending cuts, tighter border controls and deportations, and a surge in policy uncertainty, Fitch forecasts growth to remain relatively resilient at 1.9% in 2026-2027, down from 2.8% in 2025.
The resilience of the U.S. economy amid heightened uncertainties from tariff changes and oil price spikes reflects its ability to absorb shocks and underscores its flexibility. However, labour demand has weakened, and job creation has dropped significantly in 2026.
The Fed’s preferred measure of inflation reached an annual rate of 3.7% in June, although core personal consumption expenditure was lower at 3.3%.
Annual inflation remains stubbornly above the Fed’s 2% target, and we project it will average 3.4% in 2026, above the forecast ‘AA’ median of 2.9%.
“We expect inflation to move toward the target by year-end 2028. Tariffs have contributed to higher core goods inflation, though pass-through has been less severe than expected”.
Fitch said the federal government maintains strong financing flexibility due to the U.S. dollar’s dominant share (58%) in global reserves.
The dollar remains the most important currency for global trade, payments and financial markets, with 89% of all over-the-counter operations denominated in U.S. dollars, multiple times higher than any other currency.
The share of foreign ownership in U.S. Treasuries has held steady at close to 30% for the last five years. Fitch forecasts the 2026 GG deficit will widen to 7.4% of GDP in 2026 from 6.8% in 2025, driven by One Big Beautiful Bill Act tax cuts and USD 100 billion in tariff rebates as of July 2026. GG deficits, forecasted at 7.4% of GDP in 2027, will remain the highest in the ‘AA’ category, partly reflecting higher military expenditures and interest costs. Fiscal pressures will increase as Medicare and Social Security expenditures expand by nearly 1 pp of GDP by 2032.
Efforts to reduce the deficit through expenditure adjustments will be limited since non-defense discretionary spending is less than 15% of total expenditures.
Fitch forecasts GG debt-to-GDP to rise to 123% by YE 2028, up from 117% at YE 2025, more than double the ‘AA’ median of 46.3% of GDP.
“Under our medium-term debt dynamics forecast, the GGD/GDP would reach 128% of GDP by 2030 under current policy settings, leaving the U.S. vulnerable to future economic shocks”.
Growth in debt is exacerbated by the increased interest burden. Ratings analysts forecast the GG interest-to-revenue ratio to reach 12.6% by 2028, up from 11.8% in 2025, which is unfavourable relative to the forecast ‘AA’ median of 3.5%.
Fitch expects the USD 41.1 trillion debt ceiling will be reached in mid-2027, and analysts project the Treasury’s cash balance – currently at USD 967 billion – to remain relatively stable over the next 12 months.
In combination with extraordinary measures, these funds should give the government several months before reaching the so-called x-date, when it would run out of cash and other options to fully meet its obligations.
Checks and Balances Remain Under Pressure: President Trump has challenged institutional checks and balances since taking office in January 2025.
He has tried to advance much of his agenda, including extensive use of tariffs, without Congressional input but has faced some pushback.
The courts have ruled against the administration in several areas, including IEEPA tariffs and the ability to fire Fed board members.
The narrow Republican majority in Congress has also made it difficult to pass key legislative initiatives, such as major increases in defense spending and tighter voter identification requirements.
The Trump administration has already advanced some of its legislative priorities including tax cuts and immigration enforcement. However, it may face greater difficulty following November’s mid-term elections.
Polls indicate that the House of Representatives will flip to a slim Democratic majority, while the Senate will remain in Republican control, although Democrats still have a narrow path to take the chamber.
Congressional investigations would expand with divided government. Gridlock and government shutdowns may become more likely and possibly more protracted as well. Japan Commits $3.5m Grant to Boost Nigeria’s Rice Seed Production
