Markets Expected Credit Ruling, but Risks Remain, Analysts Say

As reported by the NYT’s Motoko Rich and Graham Bowley, the hit to the United States’ prized credit rating may have arrived with a jolt Friday, but many analysts say it’s not so clear that it will deliver any immediate shock to financial markets or to consumers. That is because it confirmed what the markets, economists and most people already know: the United States has a debt problem and Washington is deeply divided over how to solve it.

“I think this is already baked in the cake,” said Garett Jones, an economist at the Mercatus Center at George Mason University, suggesting that investors and bond traders had already accounted for a downgrade. “It’s not a disaster. It’s just that we’re a little bit riskier, a little bit crazier than people thought a month or two ago.”

However, with the United States economy on such fragile footing and growth remaining elusive, and with Europe desperately trying to contain its debt crisis, anything that undermines already low confidence levels could create a ripple effect and further stall the recovery.

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