Fitch Keeps the United States at AA+ and Sees Debt Reaching 123 Percent of GDP

By The Edge Research Team

Fitch Ratings affirmed the long-term foreign-currency and local-currency issuer default ratings of the United States at AA+ with a stable outlook on 13 August 2026, leaving the rating where it has stood since the agency’s downgrade from AAA in 2023.

Fitch attributes the rating to the size of the economy, high income per head, a dynamic business environment and what it calls exceptional financing flexibility arising from the dollar’s role as the preeminent global reserve currency. Set against that are high fiscal deficits, a substantial interest burden and rising government debt. The agency’s summary judgement is blunt: government debt is more than double the AA rating median, and the government has not taken meaningful action on general government deficits that have averaged 7 percent of GDP since 2022.

The fiscal arithmetic

Fitch forecasts the general government deficit to widen to 7.4 percent of GDP in 2026 from 6.8 percent in 2025, attributing the widening to tax cuts under the One Big Beautiful Bill Act and to 100 billion dollars of tariff rebates as at July 2026. It forecasts the same 7.4 percent for 2027, and says deficits will remain “the highest in the ‘AA’ category”, partly reflecting higher military expenditure and interest costs.

Fitch Ratings, 13 August 2026. Fitch also forecasts the general government interest-to-revenue ratio at 12.6 percent by 2028, from 11.8 percent in 2025, against a forecast AA median of 3.5 percent.

An interest burden approaching thirteen percent of revenue against an AA peer median of three and a half is a particularly large gap, and it compounds: Fitch notes that growth in debt is made worse by the rising interest burden. The agency adds that scope to close the deficit through spending cuts is limited, because non-defence discretionary spending is less than 15 percent of total expenditure, while Medicare and Social Security are projected to expand by nearly one percentage point of GDP by 2032.

Growth, inflation and the labour market

Fitch forecasts growth of 1.9 percent in both 2026 and 2027, down from 2.8 percent in 2025, and describes the economy as relatively resilient despite higher tariffs, spending cuts, tighter border controls and deportations, and a surge in policy uncertainty. It qualifies that with a clear warning: labour demand has weakened and job creation has dropped significantly in 2026.

On prices, Fitch notes the Federal Reserve’s preferred inflation measure reached an annual 3.7 percent in June, with core personal consumption expenditure lower at 3.3 percent. It projects inflation to average 3.4 percent in 2026, against a forecast AA median of 2.9 percent, and expects inflation to move toward the 2 percent target only by the end of 2028. Tariffs have raised core goods inflation, though Fitch says the pass-through has been less severe than expected.

The debt ceiling, dated

Fitch expects the 41.1 trillion dollar debt ceiling to be reached in mid-2027. It puts the Treasury’s cash balance at 967 billion dollars and expects it to remain relatively stable over the next twelve months, which together with extraordinary measures should give the government several months before the point at which it would run out of cash and other options to meet its obligations in full.

The agency also flags governance: it assigns the United States its highest ESG relevance scores for political stability and rule of law, notes that institutional checks and balances have been under pressure since January 2025, and expects that a divided Congress after November’s mid-term elections could make gridlock and government shutdowns more likely and more protracted. These are Fitch’s assessments.

Where the other two agencies stand

Moody’s action of 16 May 2025 moved the rating from Aaa and the outlook to stable from negative, per Moody’s own United States rating page. S&P Global Ratings affirmed the United States at AA+ and A-1+ with a stable outlook in its own rating action of 26 June 2026.

All three major agencies now hold the United States one notch below their top rating with a stable outlook. That is a settled position, and the significance of Fitch’s action is precisely that nothing moved.

The official data behind it

Bureau of Labor Statistics: Consumer Price Index released 12 August 2026, Employment Situation released 7 August 2026. Headline CPI was 3.5 percent and core 2.6 percent over the 12 months to June 2026.

Real gross domestic product rose at an annual rate of 1.5 percent in the second quarter of 2026 on the Bureau of Economic Analysis advance estimate of 30 July 2026. The Federal Reserve left its target range for the federal funds rate at 3-1/2 to 3-3/4 percent on 29 July 2026. The Treasury’s Debt to the Penny series put total public debt outstanding at 39,913,529,319,464.71 dollars on 12 August 2026, of which 32,180,112,234,304.32 dollars was held by the public. The Monthly Treasury Statement for July 2026 records a monthly deficit of 432,307,874,621.48 dollars and a fiscal-year-to-date deficit of 1,798,816,211,853.03 dollars. The Treasury par yield curve closed on 13 August 2026 with the 10-year at 4.63 and the 2-year at 4.15.

Why it matters

Fitch quantifies the dollar’s position in a way that is directly relevant to Gulf institutions: it puts the dollar’s share of global reserves at 58 percent, notes that 89 percent of all over-the-counter operations are denominated in dollars, and records foreign ownership of United States Treasuries holding steady at close to 30 percent for the past five years.

For Gulf central banks, sovereign institutions and banks whose mandates or internal risk frameworks reference sovereign ratings, the affirmation avoids a new Fitch-driven rating constraint on United States Treasury exposure. It does not remove market-price, liquidity or policy risk, none of which a rating action governs.

The substantive point in the commentary is not the rating but the composition of the deficit. Fitch’s own projections point to a persistent fiscal challenge rather than a cyclical one, because interest, defence and entitlement pressures are precisely the components that constrain the scope for deficit reduction.

Outlook

Fitch’s own path has the deficit at 7.4 percent of GDP in 2027, debt at 123 percent of GDP by the end of 2028 and 128 percent by 2030 on current policy, and inflation reaching target only at end-2028. Those are slow-moving variables and are consistent with Fitch’s decision to maintain a stable outlook. Two things move faster: the labour market, where a negative payrolls month against 4.1 percent unemployment shifts the interest-rate path long before it shifts a rating; and the debt ceiling, which Fitch dates to mid-2027.

Sources: Fitch Ratings, Rating Action Commentary, “Fitch Affirms the United States of America at ‘AA+’; Outlook Stable”, 13 August 2026. Moody’s Ratings, United States rating page, action of 16 May 2025. S&P Global Ratings, U.S. AA+/A-1+ Sovereign Ratings Affirmed; Outlook Remains Stable, 26 June 2026. United States Bureau of Labor Statistics, Consumer Price Index, 12 August 2026, and Employment Situation, 7 August 2026. United States Bureau of Economic Analysis, Gross Domestic Product, second quarter 2026 advance estimate, 30 July 2026. Federal Reserve, Federal Open Market Committee statement, 29 July 2026. United States Department of the Treasury, Debt to the Penny as at 12 August 2026, Monthly Treasury Statement for July 2026, and Daily Treasury Par Yield Curve, 13 August 2026.

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