The U.S.’s senior unsecured and long-term issuer ratings have been confirmed by the ratings agency at Aaa.
Without successful fiscal policy measures to cut government spending or raise revenue in the face of increased interest rates, the agency stated. “Moody’s anticipates that the US will continue to have extremely high fiscal deficits, which will severely reduce the affordability of debt.
According to Moody’s, Washington’s brinkmanship has also played a role.
The ratings agency stated that “persistent political polarisation in the US Congress increases the risk that succeeding administrations won’t be able to come to an agreement on a fiscal plan to slow the decline in debt affordability.”
Regarding maintaining the country’s Aaa ratings, Moody’s stated that it anticipates the United States of America to “maintain its exceptional economic strength.” In the medium run, the agency stated, “further positive growth surprises could at least slow the deterioration in debt affordability.”
We disagree with the adjustment to a negative outlook’, stated Wally Adeyemo, the deputy secretary of the Treasury, in a statement. “The United States’ Aaa rating is maintained by Moody’s.” Treasury securities remain the world’s most liquid and secure asset class, and the US economy remains strong.
The decision by Moody’s to lower its outlook comes as Congress is about to confront the possibility of another government shutdown. Although the government is currently funded till November 17th, legislators in Washington are still unable to agree on a measure in time for the deadline.
In an effort to give members time to review the Republican government financing plan before the anticipated Tuesday vote on the bill, newly elected House Speaker Mike Johnson (R-La.) has stated that he will make it public on Saturday.
But both in the Democratic-controlled Senate and the White House, his plan—known as a laddered continuing resolution, or CR—to fund certain parts of the government through December 7 and other elements through January 19 is unfeasible.
White House press secretary Karine Jean-Pierre said in a statement that Moody’s decision to alter the U.S. outlook is just another effect of Congressional Republican radicalism and dysfunction.
Due to “expected fiscal deterioration over the next three years,” deteriorating governance, and an increasing debt load, Fitch downgraded the U.S. long-term foreign currency issuer default rating from AAA to AA+ back in August.
Another problem in Washington was feuding. Fitch stated at the time that “confidence in fiscal management has been eroded by the repeated debt-limit political standoffs and last-minute resolutions.”