Fitch warns U.S. could lose AAA status if fiscal cliff hits

A view of New York's lower Manhattan from the Staten Island Ferry March 10, 2008.

Credit: Reuters/Brendan McDermid

By Marc Jones

LONDON | Wed Dec 19, 2012 5:23am EST

LONDON (Reuters) - Ratings firm Fitch warned on Wednesday there was an increased likelihood it would strip the U.S. of its triple-A status if Washington does not prevent $600 billion of spending cuts and tax hikes from kicking in early next year.

"Failure to avoid the fiscal cliff.. would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the US into an avoidable and unnecessary recession," Fitch said in its 2013 global outlook published on Wednesday.

"That could erode medium-term growth potential and financial stability. In such a scenario, there would be an increased likelihood that the U.S. would lose its AAA status."

Fitch current has a negative outlook on its U.S. sovereign rating. Rival rating agency Standard & Poor's was the first to strip the U.S. of its triple-A status in August last year.

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(Reporting by Marc Jones; Editing by John Stonestreet)

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