- Moody’s has lowered its outlook for the US government to negative from stable
- However, the US will retain its AAA credit rating, the agency confirmed this evening
It was announced this evening that the rating agency Moody’s Analytics has lowered its outlook for the US government from stable to negative.
Officials cited higher interest rates and concerns about America’s financial strength as justification for the move.
Biden administration officials reacted to the decision on Friday, calling the shift a reflection of “extremism and dysfunction” among Republicans in Congress.
In a statement, Moody’s wrote: “In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues.”
“Moody’s expects U.S. budget deficits to remain very high, significantly weakening debt affordability.”
It was announced this evening that the rating agency Moody’s Analytics has lowered its outlook for the US government from stable to negative
It added that “political polarization” in Washington raises the risk that successive governments will be unable to “reach consensus on a budget plan to slow the decline in debt affordability.”
Despite the strong language, Moody’s affirmed the US’s AAA credit rating, adding that the US would maintain its “extraordinary economic strength.”
Deputy Treasury Secretary Wally Adeyemo said: “While Moody’s statement maintains the United States’ AAA rating, we do not agree with the shift to a negative outlook.”
“The American economy remains strong and Treasury bonds are the world’s most important safe and liquid asset.”
White House spokeswoman Karine Jean-Pierre said the change was “another consequence of Republican extremism and dysfunction in Congress.”
Moody’s based the decision on several current political events. That included the near default earlier this year, before Congress agreed to raise the debt limit.
This led to House Speaker Kevin McCarthy being fired – the first time in history that a House Speaker was fired.
The US again faces the possibility of a government shutdown on November 18 if Congress cannot agree on short-term spending plans.
Such economic disruption would come at a difficult time for investors already struggling with rampant inflation and high U.S. budget deficits.
Moody’s had previously hinted at a possible downgrade in a Sept. 25 report, saying that while a short-term shutdown “would likely not disrupt the economy, it would underscore the weakness of the U.S.’s institutional and governance strengths relative to other AAA countries.”
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