Moody’s lowers outlook on US government credit to negative

Moody’s lowers outlook on US government credit to negative

11 Nov, 2023

 

Moody’s lowers outlook on US government credit to negative

 

The credit ratings agency Moody’s altered its forecast for the US government, changing it from a stable to a negative outlook. This adjustment was attributed to the discord in Washington, posing threats to the nation's fiscal stability.

Despite sustaining the US's current top-grade AAA rating, Moody’s indicated a potential downgrade. The agency cautioned that the US's deficits are expected to persist at significant levels, particularly in the face of rising interest rates. It also expressed concerns about prolonged political polarization in Congress, highlighting the risk of an impasse in forming a fiscal strategy to curb the decline in debt affordability.

With the federal government teetering on the edge of another shutdown, time is ticking for the Republican-led House, Democratic-led Senate, and the Biden administration to find a resolution for funding.

The Biden administration opposed Moody’s decision, disagreeing with the shift to a negative outlook. This alteration arrives merely three months after another major agency, Fitch, lowered its top rating for the US. Standard & Poor’s had already taken a similar step.

According to Moody’s, in the context of escalating interest rates and the absence of effective fiscal policies to trim government expenses or boost revenues, the US’s fiscal deficits are likely to persist, significantly eroding debt affordability.

Wally Adeyemo, the US deputy treasury secretary, contested Moody’s decision, emphasizing the robustness of the American economy and the pre-eminence of treasury securities worldwide.

White House press secretary Karine Jean-Pierre pointed fingers at what she termed "congressional Republican extremism and dysfunction" as another contributor to the situation.

 


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