Translated material
Rating risks
Washington may be punished for budget deficit
The US risks losing its top credit rating due to its huge budget deficit. However, the White House is trying to assure the public that new infrastructure programs will not lead to an increase in the deficit. Nevertheless, the Americans are clearly not yet ready to begin implementing a strategy for exiting anti-crisis programs.The international rating agency Moody's warned the US and UK that growing budget deficits threaten their sovereign credit ratings. Thus, Moody's gave a unique response to the criticism of the financial authorities of leading powers against rating agencies - as is known, rating agencies were designated as one of the main culprits of the financial crisis as unable to adequately assess risks. According to The Wall Street Journal, in a new report released yesterday, Moody's singled out the US and UK among 17 countries in the world with the highest credit rating - AAA. The agency confirmed that all these countries are resistant to the impact of the financial and economic crisis, but made it clear that the situation in the public finances of the United States and England is now somewhat worse than that of other major countries.
White House representatives assured yesterday that the threat of deficit growth amid President Barack Obama's new investment programs is minimal. According to them, the new measures could be paid for from the previously approved anti-crisis economic stimulus package. Let us recall that the day before the US Treasury Department announced that the Troubled Asset Repurchase Program (TARP) could cost taxpayers $200 billion less due to the efficient use of resources, as well as the fact that banks are actively returning borrowed funds. House Speaker Nancy Pelosi said the money saved would be used to support job creation. Thus, the state will be able to reduce the budget deficit, since new jobs will increase tax revenues, she added.
One White House official told ITAR-TASS yesterday that Barack Obama inherited “an absolutely monstrous budget deficit” and “now he is taking active steps to reduce it.” The fiscal year 2011 budget proposal will make tough choices on a number of programs to further reduce the deficit, a presidential administration official said.
The latest Labor Department data showed the U.S. unemployment rate unexpectedly fell to 10% in November, marking the smallest job losses since the recession began in December 2007. After this, experts started talking about the fact that interest rates could be raised sooner than expected.
Ben Bernanke responded that the situation in the US economy has improved, but due to problems in the labor market and the difficult situation in the credit markets, further recovery will be slow. According to him, unemployment may remain at fairly high levels for some time. Mr. Bernanke stressed that consumer spending is unlikely to grow rapidly amid a weak labor market and limited access to credit.
“We now see that the current economic conditions will continue for some time. Low consumption, weak inflation and stable long-term inflation expectations have all remained at previous levels,” Mr Bernanke said, adding that the US central bank would be prepared to unwind large-scale stimulus measures when the recovery becomes more robust. According to him, economic forecasts now have a high degree of uncertainty. However, the most likely scenario for the development of the situation is the continuation of moderate economic growth in 2010, which will result in a decrease in the unemployment rate.
Last month, the Fed's Open Market Committee said its benchmark rate, which has been near zero for a year, will remain low until inflation begins to rise and unemployment stops rising. Mr Bernanke has now confirmed that these terms have not changed.
“Despite the pleasant surprise in last week's labor market report, it is still too early for the Fed to embark on an exit strategy,” New York University economics professor Mark Getler told Bloomberg. “When the time is right, the Fed will be ready to begin.” The head of the Federal Reserve Bank of New York, William Dudley, believes that the unemployment rate is too high. If the job market remains weak and inflation low, it will be acceptable to keep refinancing costs at record lows for an extended period, Mr Dudley said.