Fitch Maintains Broadly Positive US Credit Outlook Despite Rising Financial Risks
Fitch Ratings expects the overall credit outlook for the United States to remain broadly positive despite higher interest rates, growing corporate borrowing and potential risks associated with artificial intelligence investment. The ratings agency said the US economy continues to receive support from consumer spending and technology-related investment, although some businesses may face increasing financial pressure as borrowing costs remain elevated.
In its latest assessment, Fitch raised its economic growth forecasts for the United States in 2026 and 2027 by 0.2 percentage points for each year, taking the projected growth rate to 2.1 percent in both years. The agency cited resilient consumer spending and investment linked to artificial intelligence as important factors supporting economic activity.
However, Fitch cautioned that a generally positive credit outlook does not mean that every company or industry is financially secure. Businesses with lower credit ratings, substantial debt obligations or greater sensitivity to interest rates could face difficulties if financing costs remain high. The agency also identified the scale of borrowing required for AI infrastructure as an important risk to monitor.
Higher Interest Rates Could Increase Borrowing Pressure
Interest rates remain a major factor influencing the US credit market. When rates remain elevated, companies may need to pay more to borrow money or refinance existing debt. This can increase interest expenses, reduce available cash and limit the funds businesses can use for expansion or other operational needs.
Fitch expects the Federal Reserve to raise its benchmark interest rate to 4.25 percent in December and maintain that level through 2027. This is the agency's forecast rather than a confirmed decision by the central bank.
The Federal Reserve held its benchmark interest rate in the range of 3.75 percent to 4 percent at its latest policy meeting on October 28, 2026. Policymakers continue to assess inflation and economic conditions while considering the appropriate direction for monetary policy.
If interest rates remain high, companies that must refinance loans or issue new debt could face more expensive financing. The pressure may be greater for businesses with limited cash reserves, weak earnings or lower credit ratings.
Some sectors are particularly sensitive to borrowing costs because they depend on financing for property development, equipment purchases or long-term projects. Higher rates can also affect investment decisions by making new projects more expensive.
Artificial Intelligence Investment Supports Growth but Creates Risks
Artificial intelligence has become an important source of investment in the US economy. Technology companies are spending heavily on computing infrastructure, data centres, advanced chips and other facilities needed to develop and operate AI systems.
Fitch said AI-driven private investment is helping support economic growth. Its assessment indicated that information technology-related private investment grew by approximately 18 percent year on year in the second quarter of 2026.
However, the agency also warned that AI investment could create financial risks if spending rises faster than the revenue and productivity gains generated by the technology.
Developing AI infrastructure requires substantial capital. Companies may need to borrow money or issue bonds to finance data centres, computing equipment and related projects. If expected returns fail to materialise, businesses could find it difficult to justify their spending or repay additional debt.
Competition in the AI market is another concern. The availability of cheaper AI models, including open-weight models that can be adapted by developers, could put pressure on the pricing power of some AI service providers. If companies are forced to reduce prices while continuing to invest heavily, their profitability could weaken.
Fitch warned that companies may reassess their AI capital expenditure plans over the next one to three years as market conditions and expected returns become clearer.
The agency also examined a more adverse scenario in which a correction in AI-related equity valuations could contribute to a US recession. Under that scenario, US gross domestic product could decline by 0.6 percent in 2027. This is a hypothetical risk scenario, not Fitch's central economic forecast.
Corporate Borrowing and Credit Markets Under Pressure
Rising borrowing requirements are also influencing the wider US debt market. Large technology companies are seeking funding to support AI infrastructure development, while the US Treasury continues to issue government debt to meet federal financing needs.
Fitch reported that US fixed-income issuance increased by 10.4 percent year on year during the first nine months of 2026. Corporate bond issuance rose by 24.5 percent over the same period.
Increased issuance does not automatically indicate financial distress. Companies may issue bonds to fund investment, manage existing liabilities or refinance maturing debt. However, a sustained rise in borrowing can increase future repayment obligations, particularly if revenues fail to grow as expected.
Credit-market conditions also differ according to the financial strength of individual borrowers. Investment-grade corporate bond spreads remained near multi-year lows, while yields on CCC-rated debt widened by around 480 basis points since the beginning of 2026, according to Fitch.
This difference suggests that investors continue to distinguish between stronger borrowers and companies facing greater repayment risks. Lower-rated businesses may have to offer higher returns to attract lenders, making it more expensive for them to obtain financing.
Private Credit Defaults Raise Concerns
Fitch also highlighted signs of pressure in private-credit markets. The agency's US private-credit default rate reached a record 6.3 percent in the 12 months through September 2026.
Private credit generally involves loans provided by non-bank lenders to companies outside traditional public bond markets. Such financing can offer businesses alternatives to bank loans or publicly traded debt, but repayment risks can rise when borrowers face weaker cash flow and higher interest expenses.
Fitch expects leveraged-loan defaults to move towards the lower end of its year-end forecast range of 4.5 percent to 5 percent. Leveraged loans are typically made to companies carrying relatively high levels of debt compared with their earnings.
Default rates are important indicators of credit conditions, although their implications depend on the size of the market, the financial strength of lenders and the ability of businesses to recover. Rising defaults can lead lenders to tighten their lending standards and demand stronger protections from borrowers.
Economic Resilience Remains a Key Support
Despitse these risks, Fitch continues to expect the US economy to grow by 2.1 percent in both 2026 and 2027. It projects fixed investment growth of 4.8 percent in 2026 and 4.6 percent in 2027.
Resilient consumer spending remains an important factor supporting economic activity. Investment in technology and AI infrastructure is also expected to contribute to growth, although the scale and sustainability of that investment remain uncertain.
The overall assessment points to a mixed outlook for the US credit market. The economy is continuing to expand, but high borrowing costs, rising debt levels and the possibility of an AI investment correction could create difficulties for some companies.
Fitch's central message is that the broader credit outlook remains broadly positive, while risks are becoming more pronounced for financially vulnerable borrowers and businesses dependent on continued technology spending.
Investors and lenders will continue to monitor interest-rate decisions, inflation, corporate borrowing, default trends and the financial returns from AI investments. These factors will hel
