Credit rating outlooks stabilized in the first half of 2014, says Fitch Ratings in its latest global credit outlook report.

The rating agency says that net rating outlooks improved in all sectors in the first half, led by sovereigns, including an upgrade for Spain and the revision of Italy’s outlook to stable.

One notable exception to this trend was European financial institutions, which are facing more negative outlooks, largely due to governments’ efforts to reduce taxpayer support for banks. These efforts to end “too-big-to-fail” policies have led to the assignment of negative outlooks on a number of entities, Fitch notes, despite the widespread improvement in capitalization.

Apart from this, the improving economic picture is driving brighter credit outlooks generally. Fitch forecasts that economic growth in the developed markets will increase to 1.8% in 2014 and 2.2% in 2015. In particular, it predicts that the U.S. should see a strong recovery in the second half of 2014, with annual growth of 2.3% and a declining output gap. “The eurozone crisis has passed its acute phase and both Germany and Spain should see healthy growth,” it adds.

That said, with the economic recovery is gaining strength, Fitch also observes that the U.S. Federal Reserve Board and the Bank of England are now faced with the challenging task of reducing the flow of easy money, which brings its own set of risks. Fitch says it sees eurozone deflation as a serious risk, but that it is not its base case.

At the same time, it says that central banks’ quantitative easing efforts have stoked inflation in certain financial assets. “As investors watch keenly for signs of a peak, sudden sell-offs risk dislocating these markets as well as causing contagion,” it says.

“The search for yield has also affected insurance company investment portfolios, with risk profiles rising, albeit from low levels. Furthermore, plentiful market liquidity and low sovereign yields are weakening the resolve of governments to continue fiscal consolidation, capping the recent trend of positive sovereign rating actions,” it notes.

Additionally, Fitch says that heightened market volatility could damage emerging markets access to finance, “at a time when growth is slowing in many countries.”