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Thomas Kenny

Fitch Warns U.S.: Raise Debt Ceiling or Face a Downgrade

By January 15, 2013

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While the fiscal cliff debate may be behind us, a potentially larger issue is still to come: the need to raise the United States' debt ceiling before the Treasury runs out of money to pay its bills. This issue hasn't received nearly the attention that the fiscal cliff did - perhaps due to the lack of a terrifying, yet catchy, nickname - but potential danger isn't lost on the ratings agency Fitch.

On Tuesday, January 15, Fitch warned Congress that unless it raises the debt ceiling,the United States may face a downgrade of it credit rating - the same event that occurred in August, 2011, when Standard & Poor's stripped the United States of its AAA rating. Forbes reports: "The ratings agency expects the borrowing limit to be raised above its current $16 trillion level, 'and that the risk of a U.S. sovereign default remains extremely low,' but reiterated previous comments that 'failure to raise the debt ceiling in a timely manner will prompt a formal review of the U.S. sovereign ratings.'"

Although Fitch made headlines with its letter, this news isn't exactly a surprise. The United States needs to address the debt ceiling within the next six to eight weeks or risk a default on its debt. It's almost certain that Congress will address the issue before the Treasury runs out of stop-gap measures to keep funding government activities, but the stakes are so high that investors need to stay tuned.

Learn more : What is the debt ceiling?

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