Moody’s downgrades outlook on US credit rating from ‘stable’ to ‘negative’
- The agency cited ‘continued political polarisation’ within the US Congress, and points to large fiscal deficits and a decline in debt affordability
- Despite the shift to a negative outlook, Moody’s remains the last of the three major rating agencies to maintain a top rating for the US government
Moody’s on Friday changed its outlook on the US credit rating from “stable” to “negative”, citing large fiscal deficits and a decline in debt affordability.
The move follows a rating downgrade of the sovereign by another rating agency, Fitch, earlier this year, which came after months of political brinkmanship around the US debt ceiling.
Federal spending and political polarisation have been a rising concern for investors, contributing to a sell-off that took US government bond prices to their lowest levels in 16 years.
The ratings agency said in a statement that “continued political polarisation” in Congress raises the risk that lawmakers will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability”.
“Any type of significant policy response that we might be able to see to this declining fiscal strength probably wouldn’t happen until 2025 because of the reality of the political calendar next year,” William Foster, a senior vice-president at Moody’s, said in an interview.
Republicans who control the US House of Representatives expect to release a stopgap spending measure on Saturday, aimed at averting a partial government shutdown by keeping federal agencies open when current funding expires next Friday.