By Peter Schroeder - 08/02/11 05:12 PM EDT
The nation's AAA credit rating is on solid footing after Congress approved a deal to raise the debt limit, according to FitchRatings.
Minutes after the Senate sent a package to raise the debt limit as well as rein in the deficit, the credit rating agency said it marked "an important first step" in reaffirming the nation's top credit rating.
However, it also noted that policymakers still had work to do on shaping up the nation's finances, and it was incumbent upon them to reach a plan that puts in place "a credible plan to reduce the budget deficit."
The agency had warned in June that if lawmakers failed to boost the ceiling by Aug. 2, it would place the nation's credit rating on Rating Watch Negative, which could have ultimately led to a downgrade.
And while blessing the increased debt limit, Fitch still offered a warning if Washington fails to follow through on its efforts to rein in the debt. On its current trajectory, it expects U.S. government debt to reach 100 percent of the nation's gross domestic product by the end of 2012 and it will continue to rise over the medium term.
Those conditions are "not consistent with the United States retaining its 'AAA' sovereign rating," it warned.
And while Fitch might have been won over, two other rating agencies still have not backed away from their threats of downgrade. Both Moody's Investors Service and Standard & Poor's had previously warned that the rating could be in danger if major steps were not taken to improve the nation's fiscal standing. In particular, S&P said there was a 50 percent chance it could downgrade the nation's rating in the next three months without a credible plan. Those two agencies have yet to comment on the deal approved by Congress.