RATING AGENCIES DISAGREE OVER US DEBT OUTLOOK

Standard & Poor’s

S&P says that the agreement made on 2 August in Washington DC “falls short of what, in our view, would be necessary to stabilise the government's medium-term debt dynamics”.

Essentially S&P is less confident in DC’s ability to significantly reduce the deficit. “The effectiveness, stability, and predictability of American policymaking and political institutions have weakened” more than expected since April.

A downbeat S&P “could lower the long-term rating to 'AA' within the next two years if it sees less reduction in spending than agreed to, [or] higher interest rates...”

Moody’s

Moody’s describes the last minute resolution made on 2 August as “a step in the right direction...we expect further fiscal measures over time.”

The American economy is strong and diverse. While it may be sluggish at the moment, Moody’s says it is confident it will pick up.

The dollar remains unique and unlike other currencies. “We see no immediate threat” to the dollar’s global status, Moody’s says.

The US debt is not “out of line” with some other governments that still have their AAA status. “We believe that eventually... [deficit reduction] measures will be adopted.”