US Treasury on alert as loss of AAA rating is forecast
US Treasury Secretary Timothy Geithner today moved to shore up confidence in the nation's economy amid fears that its top-notch credit rating faces a downgrade.
Geithner pledged to cut the budget deficit after analysts warned the US will lose its cherished AAA rating because of spiralling levels of debt after the $700 billion bailout of the financial system. "It's very important that this Congress and this President put in place policies that will bring those deficits down to a sustainable level over the medium term," Geithner said.
His remarks come only a day after Standard & Poor's reduced its outlook on the UK from "stable" to "negative" and warned there was a one-in-three chance it would lose its AAA credit rating.
The news stunned the City and Westminster and sent the pound tumbling against the dollar and a host of other currencies.
Bill Gross, manager of the world's biggest bond fund and co-chief investment officer of Pacific Investment Management, said the US will "eventually" lose its AAA rating.
He said America is "going the way of the UK" and will be downgraded in "at least three to four years, if that, but the market will recognise the problems before the rating services".
