Yellen Calls Fitch Downgrade of US Credit Rating ‘Flawed’

Treasury Secretary Janet Yellen on Wednesday slammed the move by Fitch Ratings to strip the US of its top-tier credit rating, calling it “flawed” and “entirely unwarranted.”

“Fitch’s decision is puzzling in light of the economic strength we see in the United States,” Yellen said in remarks prepared for an event in McLean, Virginia.

In the longer term, the US “remains the world’s largest, most dynamic, and most innovative economy – with the strongest financial system in the world.”

Yellen’s criticism is an echo of predecessor Timothy Geithner’s almost exactly 12 years ago when he blasted S&P Global Ratings for “really terrible judgment” in becoming the first of the three most-cited rating firms to remove the US from the top, AAA tier. Moody’s Investors Service is now alone in keeping the US at the highest grade.

Fitch late Tuesday cut the US to AA+, citing an erosion in financial governance, rising budget deficits and expected fiscal deterioration over the next three years.

Treasuries showed little immediate reaction to the Fitch move, but then slid Wednesday morning in the wake of stronger-than-expected jobs data. They accelerated their selloff following a bigger-than-expected plan for increased US debt issuance.