Moody's downgrades US credit rating on rise in govt debt
Moody's on Friday downgraded the United States's credit rating from the top triple-A level, citing rising levels of government debt and dealing a blow to Donald Trump's narrative of economic strength and prosperity.
The downgrade to Aa1 from Aaa adds to the bad news for the US president, coming on the same day his flagship spending bill failed to pass a key vote in Congress due to opposition from several Republican fiscal hawks.
Explaining its decision, the ratings agency noted "the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns."
Moody's decision to downgrade the United States from its top credit rating reflects a recent surge in US borrowing costs, which was further fueled by the Covid-19 pandemic, and mirrors similar decisions in recent years by the two other major US ratings agencies, S&P and Fitch.
"Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's said in a statement explaining its decision.
"We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration," it added, flagging that it expected larger deficits to continue over the next decade. "The US' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns," Moody's said.
The agency also changed its outlook from negative to stable, noting that despite the United States' poor record tackling rising government debt levels, the country "retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency."
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