08/01/2023 – 19:04
In the statement in which it announced the downgrade of the American rating, Fitch predicts that the United States will face a “mild” recession between the fourth quarter of 2023 and the first of 2024, given the slowdown in consumption. The agency also predicts that the growth of the country’s Gross Domestic Product (GDP) should be 1.2% in 2023, after an increase of 2.1% in 2022, followed by an increase of 0.5% in 2024.
The risk assessment agency projects that the Federal Reserve (Fed) will raise rates again in September, by 25 basis points (bp), to the range between 5.50% and 5.75%. “While headline inflation dipped to 3% in June, core PCE inflation, the Fed’s main price index, remained stubbornly high at 4.1% yoy. This will likely prevent federal funds rate cuts through March 2024.”
Regarding the “erosion of governance” mentioned in the downgrade of the country’s rating from AAA to AA+, Fitch points out that the repeated impasses on the debt ceiling have undermined confidence in the country’s supervisor. The agency had already put the US sovereign note on negative watch in May, during the height of disagreements over the debt limit.
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