Fitch affirms US at AA+, keeps outlook stable amid growth slowdown
The affirmation removes near term downgrade risk from the US sovereign story, but the accompanying commentary leans cautious rather than reassuring. Fitch’s growth downgrade from 2.8% to 1.9% alongside a weakening labor market gives fixed income desks another data point supporting the softer Fed rate hike odds already in play this week. The agency’s explicit flag on gridlock and shutdown risk, combined with a structural fiscal deterioration tied to entitlement spending, keeps the long end of the Treasury curve sensitive to any fresh political dysfunction out of Washington. None of this is new information for the market, given Fitch’s 2023 downgrade to AA+ already priced in much of this fiscal narrative, so the reaction should be muted rather than a fresh catalyst.
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Fitch keeps America’s credit score unchanged, but the fine print reads like a warning about Washington’s ability to fund its own promises.
Summary:
- Fitch affirmed the United States at AA+ with a stable outlook
- Growth is forecast to slow to 1.9% in 2026 and 2027, down from 2.8% in 2025
- The rating is supported by the size of the US economy, high per capita income, a dynamic business environment and exceptional financing flexibility
- Labor demand has weakened and job creation has dropped significantly in 2026
- Fitch expects inflation to reach target by the end of 2028
- The agency warns gridlock and government shutdowns may become more likely and more protracted, while Medicare and Social Security costs are set to expand by nearly one percentage point of GDP by 2032, adding to high deficits, a substantial interest burden and rising debt levels that constrain the rating
Fitch Ratings affirmed the United States’ long term sovereign credit rating at AA+ on Thursday, maintaining a stable outlook even as the agency flagged a slowing economy and mounting fiscal strain over the coming years.
The rating agency now expects US growth to moderate to 1.9% in both 2026 and 2027, a step down from 2.8% recorded in 2025. Fitch pointed to a clear cooling in the labor market as a key driver of that slowdown, noting that labor demand has weakened and job creation has dropped significantly this year. On inflation, the agency struck a more patient tone than some Fed officials currently debating further rate hikes, projecting that price growth will not return to target until the end of 2028.
Despite the softer growth outlook, Fitch said the AA+ rating remains underpinned by the fundamental strength of the US economy. The agency cited the sheer scale of American output, high per capita income levels, a dynamic business environment and what it called exceptional financing flexibility, a reference to the dollar’s reserve currency status and the depth of Treasury markets, as core supports for the rating even amid weaker near term growth.
The more pointed warnings in Fitch’s commentary centred on fiscal policy and political dysfunction. The agency said gridlock and government shutdowns may become both more likely and more protracted going forward, a risk that has repeatedly rattled markets in recent years as funding deadlines come and go without resolution. Longer term, Fitch highlighted the growing burden of entitlement spending, projecting that Medicare and Social Security expenditures will expand by nearly one percentage point of GDP by 2032 as the population continues to age.
Taken together, Fitch said high fiscal deficits, a substantial interest burden and government debt levels that are already high and still rising continue to constrain the rating, even as the agency stopped short of signaling any near term downgrade risk. The affirmation effectively locks in the assessment Fitch first arrived at in 2023, when it stripped the United States of its top AAA rating, citing many of the same structural concerns around fiscal governance and repeated brinkmanship over the debt ceiling. With no material change in trajectory since then, Thursday’s decision reads less as new information for markets and more as a formal restatement of a fiscal picture that ratings agencies, and increasingly bond investors, have already priced in.
Fitch is one of the “Big Three" credit rating agencies, alongside S&P Global Ratings and Moody’s, and together the three control the overwhelming majority of the global ratings market, generally estimated at somewhere north of 90-95% between them. Within that trio, Fitch is usually seen as the smallest of the three by market share and revenue, with S&P and Moody’s regarded as the more dominant, more closely watched pair, particularly by US Treasury and equity markets.
That said, Fitch still carries real weight for a few reasons. It’s recognised as a Nationally Recognised Statistical Rating Organization by the SEC, the same designation that gives S&P and Moody’s their regulatory authority, so its ratings feed into the same bank capital rules, bond index inclusion criteria, and institutional mandate thresholds. Many large institutional investors and index providers require ratings from at least two of the three agencies, which keeps Fitch structurally relevant even when it isn’t the market mover.
On sovereign ratings specifically, Fitch’s actions do tend to draw outsized attention relative to its size, largely because of precedent: its 2023 downgrade of the US from AAA to AA+ was a genuine market event, given Moody’s was the last to hold the US at the top tier until 2025 and S&P had already downgraded back in 2011. So while Fitch’s day-to-day sovereign and corporate calls often move markets less than an S&P or Moody’s action, on the US specifically it has some claim to having been ahead of the other two, which lends its commentary a bit more scrutiny than its market share alone would suggest.
This article was written by Eamonn Sheridan at investinglive.com.