By Stephen Nakrosis

Despite a deal among U.S. lawmakers to resolve the latest debt ceiling crisis, Fitch Ratings said the U.S. AAA rating remains on rating watch negative as the agency considers "the full implications of the most recent brinkmanship episode and the outlook for medium-term fiscal and debt trajectories."

On May 24, Fitch placed the U.S. ratings on rating watch negative, citing increased political partisanship. "The brinkmanship over the debt ceiling, failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden signal downside risks to U.S. creditworthiness," Fitch said at the time.

On Friday, Fitch said despite the latest agreement, continued political standoffs and last-minute suspension lower confidence in governance of debt and fiscal matters.

"There has been a steady deterioration in governance over the last 15 years, with increased political polarization and partisanship as witnessed by the contested 2020 election, repeated brinkmanship over the debt limit and failure to tackle fiscal challenges from growing mandatory spending has led to rising fiscal deficits and debt burden," Fitch said.

Strengths which support the U.S. rating, including the size of the economy and the dollar's role as the world's preeminent reserve currency, may be eroded over time by governance shortcomings, Fitch said.

The agency said it intends to resolve the negative watch in the third quarter of this year.

Write to Stephen Nakrosis at stephen.nakrosis@wsj.com

(END) Dow Jones Newswires

June 02, 2023 13:36 ET (17:36 GMT)