Fitch places US on AAA rating downgrade watch

WASHINGTON, United States — Ratings agency Fitch on Wednesday put the United States on watch for a possible downgrade over a risk of default amid a government impasse on raising the national borrowing limit.

Fitch said the AAA rating "reflects increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit" ahead of a looming deadline.

The US Treasury Department has said June 1 is the "X-date" when the government will run out of money, triggering a default with likely devastating economic consequences.

"Fitch still expects a resolution to the debt limit before the X-date," Fitch said in a statement. "However, we believe risks have risen that the debt limit will not be raised or suspended before the X-date and consequently that the government could begin to miss payments on some of its obligations."

President Joe Biden has been involved in months of tense talks with the Republican opposition in Congress, who have said they will agree to raise the borrowing limit only in exchange for significant spending cuts.

Republicans, increasingly dominated by a hard right faction loyal to ex-president Donald Trump, have decided to use this generally mundane procedure as leverage to force Biden to trim health care and other social programs.

The Biden administration said Wednesday that it still sees a path to a deal, though there were no concrete signs that the two sides were moving towards an agreement.