Moody's downgrade US credit rating: What led to Moody's downgrading the U.S. credit rating to Aa1, first time in over a century? Here are the reasons the agency cited and why Americans should be worri

Time of India

17-05-2025

Reason For Moody's Downgrading the US Credit Rating
What Does This Mean for the US Economy?
How Does This Compare to Previous Downgrades?
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For the first time in over a century, the US does not hold a top-tier rating from any major credit agency, as even Moody's Ratings downgraded the US government's credit rating from Aaa to Aa1 on Friday, as per reports.Moody's explained that it reduced the ratings due to repeated failures by successive administrations to control the country's growing debt, as per Newsweek. However, the ratings agency also mentioned that the United States 'retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the U.S. dollar as global reserve currency," quoted AP.ALSO READ: Moody's downgrades U.S. rating from AAA to Aa1; what are the consequences of this move, and will the economy be affected? Here are all the details The rating agency also pointed out that, 'We expect federal deficits to widen, reaching nearly 9% of (the U.S. economy) by 2035, up from 6.4% in 2024, driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation," quoted AP.While, Moody's also cautioned that extending US president Donald Trump's 2017 tax cuts, which is now a key priority for the Republican-led Congress, would add $4 trillion to the federal primary deficit over the next 10 years, as per Newsweek.It is the latest downgrade of the three major rating agencies to lower the federal government's credit, Standard & Poor's downgraded federal debt in 2011 and Fitch Ratings followed in 2023, reported AP.ALSO READ: Who is Mark Zandi, the Iranian-American Moody's chief economist whom Donald Trump accuses of downgrading the U.S. credit rating to Aa1? Democratic strategist Chris Jackson posted on social media platform X, saying, "BREAKING: In a stunning move, Moody's has downgraded the U.S. credit rating from Aaa to Aa1—for the first time in history. That's right: the only major credit agency that hadn't downgraded us under Trump just did. Who else enjoying all this 'economic winning' under Trump?" as quoted by Newsweek.It means the US no longer holds the highest credit rating.Moody's downgraded the US due to the rising national debt and a lack of government action to address it.