Ratings firm Fitch warned today there was an increased likelihood it would strip the US of its triple-A status if Washington does not prevent $600 billion of spending cuts and tax hikes from kicking in early next year.

"Failure to avoid the fiscal cliff...would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the US into an avoidable and unnecessary recession," Fitch said in its 2013 global outlook published today.

"That could erode medium-term growth potential and financial stability. In such a scenario, there would be an increased likelihood that the US would lose its AAA status."

Fitch current has a negative outlook on its US sovereign rating. Rival rating agency Standard & Poor's was the first to strip the US of its triple-A status in August last year.

Reuters