Key insights
- JPMorgan warns that New York City faces increased downgrade risk due to the state's reluctance to approve tax increases to address budget shortfalls. Moody's and Fitch have already revised their outlook to negative. A downgrade could negatively impact the municipal bond market and investor confidence, potentially leading to higher borrowing costs for the city and other municipalities.
Investing.com -- New York City faces heightened risk of a credit rating downgrade as the state appears unlikely to approve tax increases needed to address budget shortfalls, according to JPMorgan Chase & Co. strategists.
The city’s revenue options appear limited after New York State showed reluctance to approve major personal and corporate tax hikes that would help close expected budget gaps, the bank’s analysts said.
"We believe downgrade risk, which was already elevated, has increased as Albany appears unlikely to approve meaningful new revenue sources," JPMorgan strategists led by Peter DeGroot wrote in a report published Friday.
The city is grappling with a roughly $5.4 billion two-year budget deficit. Moody’s Ratings and Fitch Ratings have already revised their outlook on the city to negative.
New York City currently holds an Aa2 rating from Moody’s, the third-highest level of investment grade, and an equivalent AA rating from S&P Global Ratings and Fitch.
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