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Yellen Criticizes Fitch’s Credit Downgrade, Defends Strong US Economy

Treasury Secretary questions Fitch's assessment, highlights robust economic recovery

U.S. Treasury Secretary Janet Yellen is publicly criticizing Fitch’s decision to downgrade the United States’ credit rating, a move that led to a significant drop in stock prices on Wednesday.

According to their website, Fitch Ratings is a leading provider of credit ratings, commentary and research for global capital markets. They offer sovereign credit ratings that describe each nation’s ability to meet its debt obligations. Sovereign credit ratings are available to investors to help give them insight into the level of risk associated with investing in a particular country.

The downgrade was deemed “entirely unwarranted” by Yellen.

Yellen, during a visit with Danny Werfel, commissioner of the Internal Revenue Service, expressed her surprise at Fitch’s move, especially given the country’s impressive economic rebound from the pandemic, CNBC reports.

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Chart showing Long-Term Treasuries Fall To The Lowest Level In Nearly 9 Months.  Long-dated U.S. Treasury bonds fell on Wednesday as yields continued to rise. BENZINGA.

Long-dated U.S. Treasury bonds fell on Wednesday as yields continued to rise, with the Ishares 20+ Year Treasury Bond ETF (NASDAQ:TLT) plummeting to the lowest levels since November 2022.

Fitch’s Downgrade: A Flawed Assessment?

“The downgrade from AAA to AA+ was due to “expected fiscal deterioration over the next three years” and “repeated debt-limit political standoffs,” said Fitch. Yellen said that Fitch’s assessment is flawed and based on outdated data.

She argues that it fails to acknowledge the significant improvements in various indicators, including governance, over the last 2 1/2 years.

TLT_2023-08-02_20-23-44_6adfc-1024x862.png
Chart showing Long-Term Treasuries Fall To The Lowest Level In Nearly 9 Months.  Long-dated U.S. Treasury bonds fell on Wednesday as yields continued to rise. BENZINGA.

US Economy A Picture of Strength, Yellen Says

Yellen highlighted the robust state of the U.S. economy, pointing to the creation of over 13 million new jobs since January 2021, a near-historically low unemployment rate of 3.6%, and a consistent monthly decrease in overall annual inflation over the past year.

“Despite Fitch’s decision, U.S. Treasury securities continue to be the world’s leading safe and liquid asset and the American economy remains fundamentally strong,” she said in emphasis.

Treasury Secretary Janet Yellen called Fitch’s credit downgrade “surprising” considering the nation’s strong economic recovery from the COVID-19 pandemic.

Yellen touted recent robust U.S. economic numbers and said, “Treasury securities remain the world’s preeminent safe and liquid asset.”

Produced in association with Benzinga

Edited by Judy J. Rotich and Newsdesk Manager

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