- Moody’s downgrades U.S. government outlook from stable to negative
- But the US will maintain its AAA credit rating, officials confirmed tonight.
It was revealed tonight that rating agency Moody’s Investors Service has downgraded the outlook for the US government from stable to negative.
Officials cited rising interest rates and concerns about the U.S.’s fiscal strength as some of the reasons to justify the move.
Biden administration officials pushed back against the decision Friday, saying the changes reflect the “extremism and dysfunction” of congressional Republicans.
“If effective fiscal policy measures are not taken to reduce government spending or increase government revenues in the context of rising interest rates,” Moody’s said in a statement.
“Moody’s expects the U.S. budget deficit to remain very high, significantly weakening debt affordability.”
It was revealed tonight that rating agency Moody’s Analytics has downgraded the outlook for the US government from stable to negative.
It added that “political polarization” in Washington increases the risk that successive governments will not be able to “reach agreement on a fiscal plan to slow the decline in debt affordability.”
Despite the strong language, Moody’s affirmed the US’ AAA rating, adding that it expects the US to maintain its “extraordinary economic strength.”
“While Moody’s statement maintains the US’s AAA rating, we do not agree with the change to a negative outlook,” said Deputy Treasury Secretary Wally Adeyemo.
“The U.S. economy remains strong and Treasury securities are among the safest and most liquid assets in the world.”
White House press secretary Karine Jean-Pierre said the change was “a further result of extremism and dysfunction in Congressional Republicans.”
Moody’s cited several recent political events as reasons for its decision. These included a near-default earlier this year before Congress agreed to raise the debt ceiling.
As a result, House Speaker Kevin McCarthy will be removed from office, making him the first speaker of the House to be removed from office.
The United States once again faces the possibility of a government shutdown on Nov. 18 unless Congress reaches an agreement on a short-term spending bill.
Such economic disruption would come at a difficult time for investors, who are already facing rampant inflation and a large U.S. budget deficit.
Moody’s earlier signaled a possible downgrade in a Sept. 25 report, saying a short-term government shutdown was “unlikely to disrupt the economy, but the U.S. “It will highlight the weaknesses in the strength of institutions and governance.”
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