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U.S. credit downgrading may hurt economic recovery

08-06-2011 14:26 BJT

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Despite US governmental rebuttals of the downgrading, and the Federal Reserve's reassurances, the move is still likely to bring new challenges to the US's already sluggish economic recovery.

According to analysis from JP Morgan, the downgrading means interest rates for US treasury bonds could increase by 60 to 70 basis points. This will bring up the nation's borrowing cost by nearly 100 billion US dollars, imposing a heavy financial burden.

Meanwhile, other downgrades will follow for financial institutions such as Fannie Mae and Freddie Mac. Market-oriented interest rates in real estate loans and education loans are also expected to rise, impairing consumer confidence.

The IMF is also warning a downgrading in US sovereign debt will have a far-reaching global impact. It is also likely to weaken the status of the dollar as the world's main reserve currency.

Editor:Zhang Pengfei |Source: CNTV.CN

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