Statement from Fitch regarding the US debt limit increase

Fitch Ratings, an international credit rating agency, stated that the path to resolving the debt limit impasse in the US remains unclear, and reported that an increase in the short-term debt limit will not prevent future impasses. In a statement, Fitch stated that despite the announcement of their latest fiscal proposals by Republican and Democratic party leaders, the path to resolving the debt limit impasse remains unclear. The statement noted that even if an agreement is reached on increasing or suspending the debt limit, using the debt limit to obtain policy concessions may continue to be a source of conflict in the future. Fitch’s statement emphasized that an increase in the short-term debt limit will not prevent future impasses. It was pointed out in the statement that the US President Joe Biden administration’s insistence on a “clean” debt limit increase that is not tied to any policy measures makes it unclear when dialogue with Republicans will begin on the issue, and that the reactions of each side to the other’s proposal show divisions on fiscal priorities. The statement noted that the debt limit is expected to be increased or suspended in order to prevent the US from defaulting, and that if the debt limit is not increased or suspended in time, the US rating will be set as "RD" (Limited Default). Debt limit impasse The federal government in the US has reached a debt limit of $31.4 trillion that could lead to a default. The debt limit or debt ceiling means "the upper limit on the amount of money that the US government can borrow to pay its debts." Republicans, who just won the majority in the House of Representatives, are favoring significant spending cuts in the debt limit negotiations. Democrats, on the other hand, insist on increasing the debt limit and are rejecting Republicans' suggestions to cut certain spending. There is concern that the debt limit issue, which has become a deadlock between Democrats and Republicans, will shake the markets. As recession expectations increase in the US, the showdown between the two parties over the debt limit carries more risk than ever.