National Economic Council Director Kevin Hassett said there is no reason for the U.S. sovereign credit rating to be downgraded, pushing back against fiscal sustainability concerns that have kept bond markets on edge. The comments came during a CNBC interview Wednesday where he also addressed Federal Reserve policy expectations and the broader economic outlook.
National Economic Council Director Kevin Hassett said there is no reason for the U.S. credit rating to be downgraded, pushing back against fiscal concerns as the Fed weighs its next policy move.
"There is no reason U.S. debt should be downgraded," Hassett, director of the National Economic Council, said on CNBC's The Exchange on July 29.
The remarks come after Fitch Ratings cut the U.S. to AA+ from AAA in August 2023, citing governance and fiscal deterioration, while Moody's shifted its outlook to negative later that year. Hassett also discussed expectations for the Federal Reserve's monetary policy path, though he did not specify a preferred outcome for the central bank's next decision.
The statement aims to reassure bond markets watching the U.S. fiscal trajectory. Any perceived deterioration in U.S. creditworthiness could push Treasury yields higher and strengthen the dollar, raising borrowing costs across the economy and complicating the Fed's policy calculus.
Hassett's appearance on The Exchange comes as the U.S. fiscal position remains a key focus for fixed-income investors. The federal budget deficit has widened in recent years, and the national debt has continued to climb, keeping credit rating agencies on watch for any further deterioration in fiscal metrics. The last time a major agency downgraded the U.S. — Fitch's 2023 cut to AA+ — the S&P 500 fell about 1 percent in the following session while the dollar initially weakened before recovering.
The NEC director's comments also touched on the broader economic outlook and what it means for Federal Reserve policy. Markets are pricing in expectations for the central bank's next move, with the fed funds rate at elevated levels as the Fed balances inflation persistence against signs of economic softening. Hassett did not explicitly endorse a rate hike or cut, leaving investors to parse his broader economic assessment for clues about the administration's policy preferences.
The reassurance from a senior administration official may help stabilize sentiment around U.S. government bonds in the near term. If taken positively, the remarks could support Treasury prices and underpin the dollar, potentially easing financial conditions. However, the fact that the NEC felt the need to publicly address the topic suggests underlying concerns persist about the long-term debt trajectory, which could create uncertainty for investors watching the fiscal outlook.
For credit markets, the key question is whether the administration's fiscal trajectory will shift in coming quarters. Hassett's comments may provide temporary relief, but sustained improvement in U.S. creditworthiness would require concrete progress on deficit reduction, which remains a politically contentious issue.
This article is for informational purposes only and does not constitute investment advice.
