Fitch warns Fed independence is key pillar of U.S. sovereign credit rating

Summary:

• Fitch flags Fed independence as key U.S. rating support

• Agency monitoring governance and institutional checks closely

• Comments follow Trump administration pressure on Powell

• S&P also warns Fed credibility underpins U.S. rating

• Central bank independence seen as systemic credit anchor

Ratings agencies have drawn a clear line around Federal Reserve independence, warning it remains central to U.S. sovereign credit strength.

Concerns over political pressure on the U.S. central bank are now firmly on the radar of global credit ratings agencies, with Fitch Ratings reaffirming that Federal Reserve independence remains a critical pillar underpinning the United States’ AA+ sovereign credit rating.

In comments released on Monday, Fitch said it continues to view the independence of the Federal Reserve as a key institutional strength supporting the U.S. rating. The agency said it will closely monitor developments in governance, including the durability of institutional checks and balances, as well as the Fed’s effectiveness in delivering low and stable inflation.

Fitch’s remarks come amid heightened scrutiny of the central bank following reports that the Trump administration had threatened to indict Fed Chair Jerome Powell over congressional testimony given last summer related to cost overruns on a Federal Reserve building renovation project. Powell has described the move as a “pretext” designed to exert greater political influence over monetary policy, reigniting debate over the independence of the central bank.

The issue is not confined to Fitch. Rival agency S&P Global Ratings has also flagged Fed credibility as a cornerstone of U.S. sovereign creditworthiness. In an October report, S&P warned that the U.S. rating could come under pressure if political developments were to undermine the strength of American institutions, the effectiveness of long-term policymaking, or the independence of the Federal Reserve.

S&P described the Fed’s credibility as “unparalleled,” arguing that it underpins U.S. monetary flexibility and reinforces the dollar’s status as the world’s premier reserve currency — both central components of the sovereign rating framework. When asked to comment on the latest developments on Monday, an S&P spokesperson referred back to the agency’s earlier published assessments.

Together, the statements underscore that while markets have so far taken the political noise in stride, credit agencies view central bank independence as a non-negotiable institutional anchor. Any sustained erosion of that independence, they suggest, would have implications extending beyond markets to the U.S. sovereign credit profile itself.