NEW YORK, Jan 12 (Reuters) – Fitch Ratings said on Monday it views the Federal Reserve’s independence as a key supporting factor for its AA+ U.S. sovereign rating.
The credit rating agency will continue to monitor evolution of governance, including “institutional checks and balances,” as well as the performance of the Fed in delivering low and stable inflation in its assessment of the U.S. sovereign rating, said Richard Francis, senior director at Fitch Ratings, in emailed comments.
The Fitch comments come after the Trump administration threatened to indict Federal Reserve Chair Jerome Powell over Congressional testimony he gave last summer about a Fed building project, an action Powell called a “pretext” to gain more influence over the central bank and monetary policy.
Credit ratings agency S&P Global Ratings has also cited the credibility of the Fed as a key ratings strength for the U.S. sovereign rating. In an October report, S&P Global said ratings “could come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or independence of the Fed.”
“We continue to view the credibility of the Fed as unparalleled,” S&P Global said in the October report. “This supports U.S. monetary flexibility and the role of the dollar as the premier international reserve currency—both of which are key components of the sovereign rating.”
Asked on Monday to comment on the latest developments, an S&P spokesman referred to the credit agency’s previous reports.
(Reporting by Lewis Krauskopf and Davide Barbuscia; Editing by Nick Zieminski)
