Today's Edition
(REUTERS)
Moody's downgraded the US sovereign credit rating on Friday due to concerns about the nation's growing, $36 trillion debt pile, in a move that could complicate US President Donald Trump's efforts to cut taxes and send ripples through global markets.
Moody's first gave the United States its pristine "Aaa" rating in 1919, and is the last of the three major credit agencies to downgrade it.
Friday's cut by one notch to "Aa1" follows a change in 2023 in the agency's outlook on the sovereign due to wider fiscal deficits and higher interest payments.
"Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's said on Friday, as it changed its outlook on the US to "stable" from "negative."
The downgrade, which came after market close, sent yields on Treasury bonds higher, and analysts said it could give investors a pause when markets re-open for regular trading on Monday.
The cut follows a downgrade by rival Fitch, which in August 2023 also cut the US sovereign rating by one notch, citing expected fiscal deterioration and repeated down-to-the-wire debt ceiling negotiations that threaten the government's ability to pay its bills.
Fitch was the second major rating agency to strip the US of its top triple-A rating, after Standard & Poor's did so after the 2011 debt ceiling crisis.
Investors use credit ratings to assess the risk profile of companies and governments when they raise financing in debt capital markets. Generally, the lower a borrower's rating, the higher its financing costs.
The Moody's downgrade follows heightened uncertainty in US financial markets as Trump's decision to impose tariffs on key trade partners has over the past few weeks sparked investor fears of higher price pressures and a sharp economic slowdown.
