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Saturday, October 20, 2012

U.S. credit ratings downgraded by another firm

(CBS/AP) NEW YORK - Credit rating agency Egan-Jones is downgrading its rating on U.S. debt to AA- from AA, citing Federal Reserve plans to try to stimulate the economy.

The firm said the Fed's plans to buy mortgage bonds will likely hurt the economy more than help it. Egan-Jones said the plan will reduce the value of the dollar and raise the price of oil and other commodities, hurting businesses and consumers.

"Up, up and away -- the Fed's QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the U.S. economy and, by extension, credit quality," Egan-Jones said in a report Friday, alluding to a third round of quantitative easing announced by the central bank Thursday.

"Issuing additional currency and depressing interest rates via the purchasing of [mortgage-backed securities] does little to raise the real GDP of the U.S., but does reduce the value of the dollar... and in turn increases the cost of commodities (see the recent rise in the prices of energy, gold and other commodities)."  (Continues)

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