Important points
- Ratings agency Moody’s downgraded the outlook for the U.S. economy from “stable” to “negative.”
- The move drew immediate criticism from President Joe Biden’s administration.
- This is the latest in a series of issues the rating agency has cited regarding the strength of the U.S.’s financial condition.
Ratings agency Moody’s downgraded the country’s economic outlook from “stable” to “negative” due to the country’s widening budget deficit, upsetting Washington.
The rating agency said in its latest report that the US’s Aaa rating has turned negative due to the decline in US financial strength. The group said that “absent interest rates rising and effective fiscal policy to reduce government spending and increase revenue,” the budget deficit will remain high and weaken the country’s ability to bear the debt.
Moody’s said in a statement that “continued political polarization” in Congress increases the risk that lawmakers will not be able to find common ground on a plan to slow the decline in debt affordability. Moody’s said rising U.S. Treasury yields this year have “intensified existing pressures on the affordability of U.S. Treasuries.”
“Given the realities of next year’s political calendar, we probably won’t see any significant policy response to this decline in fiscal strength until 2025,” Moody’s senior vice president William Foster told Reuters. I won’t,” he said. .
Moody’s decision follows Fitch’s August downgrade of the US credit rating from AAA to AA+. Fitch became the second agency after Standard & Poor’s to downgrade the U.S. credit rating, citing worsening finances and repeated debt ceiling negotiations, and has already finalized two deals this year, citing concerns about the government shutdown. is in danger.
President Joe Biden’s administration “does not agree with changing the outlook to negative,” Deputy Treasury Secretary Wally Adeyemo said in a statement following the Moody’s downgrade.
“The U.S. economy remains strong and Treasury securities are among the safest and most liquid assets in the world,” he added.