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US affirmed at AAA by Fitch; 'Fed to hike rates in mid-2015'

FXStreet (San Francisco) - Fitch rating affirmed the United States sovereign rating at AAA with stable outlook according to a press release published by the agency.

Fitch highlights the financial flexibility and the capability of US in tolerating higher levels of public debt. In addition, Fitch points out about the standards of living in the US that are above the AAA countries median.

Fitch also forecasts "the federal government budget deficit to decline to 2.9% of GDP in FY14, from 4.1% of GDP in FY13 and 9.8% in FY09." However, the agency reminds that "on current policies it will start rising again from FY16, reaching 3.8% in 2022, driven by the impact of population ageing on social security and health spending, and higher net interest costs."

Fitch expects that the Fed will "start raising interest rates in mid-2015."

Other quotes:

We forecast federal government debt held by the public at 73.5% at end-2014 and to rise to 75% in 2024.

Fitch forecasts gross general government debt (GGGD) to peak at 100% at end-2014 (excluding trade payables and unfunded pension liabilities, consistent with EU countries). We then project it to decline slightly to 98% in 2018, before starting to trend up again, reaching 104% by 2024.

The US recovery is outpacing that in most advanced countries, albeit sluggish by its own historical standards. Fitch forecasts GDP growth of 2% in 2014, picking up to 3.1% in 2015 and 3% in 2016.

We expect the Federal Reserve to start raising interest rates in mid-2015, after completing 'tapering' of its asset purchase programme in October 2014.

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