MercoPress. South Atlantic News Agency

Fitch reaffirms US sterling AAA rating but calls for political agreement

A good piece of news for embattled President Obama

Fitch Ratings on Tuesday reaffirmed the United States' AAA credit rating. The move comes less than two weeks after Standard & Poor's downgraded the United States' long-term debt to AA+.

“The key pillars of US's exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base. Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to 'shocks'“ Fitch said in a statement.

Fitch did add a caveat, however. It would likely revise its outlook on the U.S. rating to negative from stable if the congressional committee charged with proposing at least 1.2 trillion dollars in deficit reduction fails to reach agreement, or if the economic recovery proves weaker than expected. That means there would be a greater than 50% chance that Fitch would downgrade the country within two years.

Still, that's more lenient than Moody's, which reaffirmed the United States' AAA status in early August but announced it was also lowering its outlook on U.S. debt to ”negative“.

Moody’s left open the possibility that it might downgrade the United States if the recent debt ceiling deal fails to achieve the deficit reduction promised, if the economic outlook deteriorates significantly or if interest rates spike and increase the government's borrowing costs.

Reaffirmation of the US sterling rating by Fitch and Moody's is no doubt some comfort to the President Obama administration, which expressed anger and frustration when Standard & Poor's on Aug. 5 downgraded the Untied States, citing the ”political brinksmanship“ in the debt-ceiling debate as indication that governance in Washington has become ”less stable, less effective, and less predictable.”

The difference in opinion between the credit rating agencies is less about the facts of US debt than about their level of scepticism regarding lawmakers' ability to compromise and follow through on meaningful debt reduction.

The Fitch news didn't appear to offer much support to stocks on Tuesday morning, as traders were consumed by news of the European debt crisis and slower-than-expected growth particularly in Germany.