Written by Davide Barbuscia
NEW YORK (Reuters) – Ratings agency Fitch says the prospects for a unified government under President-elect Donald Trump are weak given the narrow Republican majority in the House and continued intraparty disagreements over spending policy. is unlikely to lead to a quick resolution to the debate over the U.S. debt ceiling. .
As part of the 2023 budget agreement, Congress temporarily raised the debt ceiling until January 1, 2025. The U.S. Treasury can continue to shoulder the debt for several more months, but Congress will need to revisit the issue this year to avoid a default.
Fitch, which downgraded the U.S. government’s credit profile in 2023 in the wake of the debt ceiling crisis, said on Tuesday it was skeptical that any expected debt ceiling suspension or increase this year and other key fiscal policy decisions would be implemented quickly. He said that.
“The United States faces significant fiscal policy challenges in 2025,” the department said in a statement. “Longstanding weaknesses in the federal budget process and the narrow Republican House majority make it unlikely that these will be resolved quickly.” We think it’s low.”
Hopes that one-party control of the government would make it easier to agree to raise the debt ceiling were dashed last month when Congress passed a spending bill in a close vote, averting a destabilizing government shutdown. Several Republican lawmakers rejected President Trump’s request to use the bill to raise the nation’s debt ceiling.
Fitch said the last-minute resolution is consistent with the rating agency’s expectation that Congress will rely on temporary funding measures and “secure agreement on fiscal measures both within Congress and between Congress and the President. “Potential obstacles to this,” he said.
The cost of insuring exposure to U.S. government debt started rising this week, with spreads between six-month and one-year U.S. credit default swaps (a market-based measure of default risk) increasing by 3 basis points to 4. Expanded by basis points. Each compares with last week, S&P Global Market Intelligence data showed Tuesday.
A showdown over the debt ceiling in 2023 sent stocks and bonds crashing, pushing the U.S. to the brink of default and hurting the country’s credit rating.
Fitch said it expects U.S. policymakers to eventually reach agreement on the debt ceiling as well as other key fiscal policy items, including an extension of the 2017 tax cuts that are set to expire this year.
But the still difficult political environment means decisions are likely to be made on an issue-by-issue basis, “underscoring the deterioration of US fiscal governance in recent years,” the paper said.
(Reporting by Davide Barbuscia; Editing by Rod Nickel)
