US Credit Rating Cut by Egan-Jones again, cites Quantitative Easing

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    Sep 14, 2012 8:51 PM GMT
    http://www.cnbc.com/id/49037337

    Ratings firm Egan-Jones cut its credit rating on the U.S. government to "AA-" from "AA," citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country's credit quality.

    The Fed on Thursday said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market.

    In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.'s real gross domestic product, but reduces the value of the dollar.

    In turn, this increases the cost of commodities, which will pressure the profitability of businesses and increase the costs of consumers thereby reducing consumer purchasing power, the firm said.

    In April, Egan-Jones cuts the U.S. credit rating to "AA" from "AA+" with a negative watch, citing a lack of progress in cutting the mounting federal debt.

    Moody's Investors Service [MCO 43.82 0.07 (+0.16%) ] currently rates the United States Aaa, Fitch rates the country AAA, and Standard & Poor's rates the country AA-plus. All three of those ratings have a negative outlook.
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    Sep 14, 2012 9:01 PM GMT
    More here:
    http://www.bloomberg.com/news/2012-09-14/egan-jones-cuts-u-s-rating-to-aa-after-fed-adds-to-stimulus.html

    The Fed’s latest program will “stoke the stock market and commodity prices, but in our opinion will hurt the U.S. economy and, by extension, credit quality,” Egan-Jones said. “The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers, thereby reducing consumer purchasing power.”

    The Fed yesterday announced its third round of large-scale asset purchases since 2008, saying it will buy $40 billion of mortgage debt a month. The central bank didn’t set any limit on the ultimate amount it would buy or the duration of the program. Policy makers also extended the prospect of near-zero interest rates until mid-2015 and said policy will stay accommodative “for a considerable time” even after the economy strengthens.