Issuing a fresh warning, Standard and Poor's on Sunday said that there is one-third chance of further downgrading of US's sovereign credit rating, two days after it downgraded it from AAA to AA+, sending shock waves across the country.
Giving a bleak future of America's credit rating, a top official of S&P said, "We have a negative outlook,...which... leads to a longer time frame, from 6 months to 24 months."
If the fiscal position of the United States deteriorates further or if the political gridlock becomes more entrenched, then that could lead to a downgrade.
The outlook indicates at least a 1 in 3 chance of a downgrade over that period," John Chambers, managing director of S&P told the ABC news in an interview.
Chambers said S&P has been saying for some time that the fiscal trajectory of the United States was on a bad path and that the political gridlock in Washington leads it to conclude that policymakers don't have the ability to pro actively put the public finances of the US on a sustainable footing.
"We said that in April. We said that again in July. We think our message has been pretty consistent.
And we also think that the numbers speak for themselves," he said, defending S&P's unprecedented decision to downgrade US credit rating from AAA to AA+
Responding to a question, Chambers said it would take a while for the US to get back its AAA rating.
"Well, if history is a guide, it could take a while.
We've had five governments that lost their AAA that got it back. The amount of time that it took for those five range from 9 years to 18 years, so it takes a while," he said.
"Our concerns are centered on the political side and on the fiscal side. So it would take a stabilisation of the debt as a share of the economy and eventual decline. And it would take, I think, more ability to reach consensus in Washington than what we're observing now," he said.
Chambers said there is a set of criteria that S&P's applies to all 126 central governments that it rates.
"It rests on five pillars: the political side, the real economy, the fiscal side, the monetary side, the external side. We have a committee of -- that's international committee of -- that applies this criteria," he said. You know, 10 years ago, we lowered Japan's rating.
They're the second-largest economy. They also have a reserve currency. It's not the number-one reserve currency, but it is a reserve currency.
And, you know, I think most people agree with that downgrade. I think as time passes, people will come to see that the United States' credit standing is really not quite the same level as -- as the ones that we rate AAA," he noted.
