It’s not AAA anymore but that’s a win.
Key takeaways:
US benefits from economic strength, reserve currency statusHigh deficits, debt, and political polarization remain concerns2024 election unlikely to significantly change fiscal outlookDeficits expected to remain high: 8.1% of GDP in 2024, 7.7% in 2025-26Government debt-to-GDP ratio projected to hit 124.4% by end-2026GDP growth forecast: 2.1% in 2024, slowing to 1.6% average in 2025-26Fed rate cuts expected: First cut in Sept 2024, total 175bps through 2025Negative rating action could stem from:
Marked increase in government debtDecline in US dollar’s reserve currency statusPositive rating action possible with:
Fiscal adjustment leading to medium-term debt reductionImproved governance
‘Improved governance’… well, at least there is a low bar. Meanwhile, those deficits are massive relative to other trading partners. While they are boosting growth, you have to recoil at what they will be if/when the US runs into a recession.
This article was written by Adam Button at www.forexlive.com.
