Moody Credit Rating: Moody Downgrades US Credit Rating | Moody's US rating cut

Moody Credit Rating: Moody Downgrades US Credit Rating | Moody's US rating cut

Moody’s Ratings downgraded the United States' long-standing top-tier credit rating from Aaa to Aa1, marking the first time since 1917 that the U.S. has lost its perfect rating from all three major credit agencies.

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Key Reasons for the Downgrade

Rising Federal Debt and Deficits: Moody’s projects that federal deficits will widen to nearly 9% of GDP by 2035, up from 6.4% in 2024. This increase is driven by higher interest payments, growing entitlement costs, and relatively weak revenue growth  .

Political Gridlock: Persistent political stalemates have hindered efforts to implement effective fiscal policies. Recent failures to pass significant tax and spending reforms underscore the challenges in addressing the nation's fiscal trajectory  .

Extension of Tax Cuts: The potential extension of the 2017 tax cuts, a priority for the current administration, could add approximately $4 trillion to the primary deficit over the next decade  .

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Market and Political Reactions

The downgrade has led to increased yields on U.S. Treasury securities, reflecting higher borrowing costs for the government  . While the White House criticized the move, emphasizing the U.S.'s economic strengths, analysts view the downgrade as a significant warning about the nation's fiscal health  .

Outlook

Despite the downgrade, Moody’s has assigned a "stable" outlook to the U.S. credit rating, citing the country's robust economic fundamentals, including the size and resilience of its economy and the role of the U.S. dollar as the global reserve currency  .

This development underscores the importance of addressing the structural fiscal challenges facing the United States to maintain investor confidence and economic stability .