U.S. rating agency Moody’s on Friday lowered the outlook for the U.S. credit rating to “negative” from “stable”, citing large fiscal deficits and declining debt affordability. The move immediately drew criticism from the White House. Moody’s is the last of the three major rating agencies to maintain the U.S. government’s highest rating. Fitch changed its rating from tripleA to AA+ in August, joining Standard & Poor’s, which has held an AA+ rating since 2011.
issuing time: 11/11/2023 – 10:15
According to Reuters, Moody’s turned negative on the U.S. credit rating. Prior to this, another U.S. rating agency, Fitch, also downgraded its sovereign rating this year after the United States adopted special policies surrounding the debt ceiling in the past few months.
U.S. federal spending and political polarization have been growing concerns for investors, sending U.S. government bond prices to their lowest levels in 16 years.
Moody’s ratings agency said in an announcement that “ongoing political polarization” in the U.S. Congress increases the risk that lawmakers will be unable to agree on a fiscal plan to slow the decline in debt affordability.
“Due to the realities of next year’s political calendar, we may not see any significant policy response to declining fiscal strength until 2025,” Moody’s senior vice president William Foster told Reuters in an interview. “
Republicans who control the U.S. House of Representatives are expected to unveil a stopgap spending measure on Saturday aimed at averting a partial government shutdown by keeping federal agencies open when current funding expires next Friday.
Moody’s is the last of the three major rating agencies to maintain the U.S. government’s highest rating. Fitch changed its rating from tripleA to AA+ in August, joining Standard & Poor’s, which has held an AA+ rating since 2011.
Moody’s affirmed its long-term issuer and senior unsecured ratings at ‘Aaa’, citing U.S. credit and economic strength, despite changing its outlook to indicate a possible downgrade in the medium term.
Immediately after Moody’s was released, White House spokesperson Karine Jean-Pierre said the change was “another consequence of Republican extremism and dysfunction in Congress.”
U.S. Treasury Undersecretary Wally Adeyemo said in a statement, “While Moody’s statement maintains the U.S.’s Aaa rating, we do not agree to turn the outlook to negative. The U.S. economy remains strong and the national debt is the largest in the world. The most important security and liquid asset.”
Moody’s downgrade is likely to heighten fiscal concerns, but investors said they doubted it would have a significant impact on U.S. bond markets. The U.S. bond market is considered a safe haven because of its depth and liquidity.
According to Reuters, Moody’s decision comes as Biden, who is seeking re-election in 2024, has seen a sharp decline in support in opinion polls. A New York Times/Siena poll released Sunday showed him trailing the leading Republican candidate in five of six battleground states: Nevada, Georgia, Arizona, Michigan and Pennsylvania. , former President Trump.
But Biden leads Trump in Wisconsin.
The results in these six states will help determine who wins the presidential election.
Moody’s move will also put pressure on congressional Republicans to advance funding legislation to avoid a partial government shutdown.