Health of U.S. credit fundamentals still under scrutiny: DBRS

By James Hilton and Cameron Jacox | June 7, 2023 | Last updated on June 7, 2023
1 min read
Stethoscope on money

The latest debt-ceiling crisis may have been averted, but DBRS Morningstar is still contemplating how the showdown impacts the credit fundamentals of the U.S. sovereign rating.

Back on May 25, during the political standoff, the rating agency placed its U.S. sovereign ratings under review with “negative implications.”

“The rating action reflected the risk of Congress failing to increase or suspend the debt ceiling in a timely manner, particularly in the context of heightened political polarization,” it said.

The immediate risk of a debt default has since been resolved with the bipartisan passage of legislation that avoids a government shutdown.

Among other things, that legislation limits government spending growth in 2024 and 2025, and is projected to reduce budget deficits by $1.5 trillion from 2023 to 2033, DBRS said.

“The [legislation] also suspends the debt ceiling until January 1, 2025, thereby eliminating the need to approve further increases until after the 2024 elections,” it noted.

However, the rating agency said the rating remains “under review” as it continues to “consider the implications of the recent standoff and evaluate the impact of polarization on the predictability of U.S. policymaking.”

James Hilton and Cameron Jacox