[Music] Another big headline today Fitch ratings Has downgraded the U.S government's top Credit rating yeah and this marks only The second time the nation has been Stripped of its AAA rating by a major Agency the rating is now double A Plus So this downgrade comes after the January 6th Insurrection and the last Debt ceiling standoff which is one of Three major credit agencies it also Comes 13 years after standard and Poor's Cut the nation's credit rating by one Notch after the U.S came close to Default U.S treasury secretary Janet Yellen is criticizing the move as quote Arbitrary and based on outdated data she Also says the US economy remains quote Fundamentally strong joining us now is Gina s milek she's a reporter who covers The Federal Reserve in the U.S economy For the New York Times Gina good to have You with us so first of all just explain What this downgrade means for our Viewers and how it could impact the Nation's economy It means that Fitch a ratings agency has Determined that the United States is a Little bit safe and we're less safe than It previously thought it was so we had Basically the strongest rating out there And now because of debt limit Brinksmanship because of the size of Government deficits and because there's
No plan to make those deficits smaller Over the medium term Fitch is saying not Quite as safe the Practical implications Of that are relatively limited you know It's we've clearly been talking to Economists and reading Bank analysts Notes and trying to figure out what this Means and it does seem like most people Are saying this didn't add new Information this didn't contribute Something that we didn't already know About the fiscal picture and so the sort Of you know what this is what the Fallout is going to look like in markets Could be relatively muted Um fortunately there it doesn't seem Like you know it is the case that Sometimes investment managers aren't Allowed to hold debt below a certain Rating it doesn't seem like this is Going to be the kind of thing that would Trigger a lot of those Clauses in Management contracts so we're not Expecting a lot of foreselling of assets Out of this and so you know generally I Think that this is a warning sign a Warning shot maybe but not a huge crisis Yeah Jenna because I was wondering as You were saying that those you seem to Be confident in the short term that this Isn't going to have a Major Impact but I'm wondering about the long term Because Fitch cites quote the Deterioration of the governance here in
The country and the the Um debt standoff and and justifying the Downgrade so what might that mean down The line Yeah so I think that there's sort of two Questions here one is does this Downgrade itself matter very much and I Think the answer to that is no probably Not but I think the things that caused This downgrade the things that this is Sort of you know the result of those Could matter in the long run and so I Think like I said this is more of a Warning signal than anything else you Know the issues that Fitch is Identifying are really all about fiscal Sustainability over the longer term you Know does the nation have a plan for Dealing with it when the Social Security Trust fund Runs Out does the nation have A plan to sort of hem in the size of Deficits as interest rates you know mean That interest paying the country's Interest it becomes more expensive with Each passing year and what Fitch is Basically saying here is the answer to Those questions is no the government Doesn't have a good plan for this Government has become more divided on These issues not less and so there's not A clear path to resolution here all Right a downward trajectory that we are Not pulling out for even if our economy Is getting better I want to also ask
Eugena about an article that you wrote About the rise of soft Landing optimism When it comes to inflation and interest Rates from your perspective are we now Clear from a full-blown recession Well interestingly Fitch doesn't think So that's actually part of part of its Argument here it's it expects uh its Economists expect an uh recession next Year but I think you know one of the Things that has been a real feature of The last couple of weeks is that the Data have been coming in a lot better When it comes to sort of pointing toward A soft Landing where we can get Inflation done without causing a big uh Recession and so you're hearing a lot of Economists really feel a lot more Confident that we might be able to sort Of squeak through this one with slower Growth but not actually no growth or Negative growth and so I think that's Very good news that said you know it's Really hard to call these things so I Don't think we should be too confident Just yet all right Gina Smiley thank you Thank you
