Moody’s on Friday changed its outlook on the US credit rating to “negative” from “stable” citing a large fiscal deficit and a decline in debt capacity.
The move follows a downgrade of the government’s rating by another rating agency, Fitch, earlier this year, which came after months of political turmoil around the US debt ceiling.
“Continued political polarization in the US Congress increases the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” Moody’s said in a statement.
Republicans who control the House of Representatives expect to issue 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 retain the top rating for the US government. Fitch changed its rating from triple-A to AA+ in August joining S&P, which has had an AA+ rating since 2011.
Moody’s is the last of the three major rating agencies to retain the top rating for the US government. AP
Although it changed its outlook – indicating a possible downgrade in the medium term – Moody’s affirmed its long-term issuer and senior unsecured rating at ‘Aaa’ citing US credit and economic strength.
“The strength of US institutions and governance is also very high, supported mainly by the effectiveness of monetary and macroeconomic policies,” he said.
Top officials in President Biden’s administration rejected the move.
White House spokeswoman Karine Jean-Pierre said the changes were “another consequence of the extremism and dysfunction of congressional Republicans.”
Top officials in President Biden’s administration rejected the move.AP
“Despite the statement by Moody’s maintaining the AAA rating of the United States, we do not agree with the shift to a negative outlook. America’s economy remains strong, and Treasury securities are the world’s leading safe and liquid assets,” Deputy Treasury Secretary Wally Adeyemo said in a statement.
Adeyemo said the Biden administration has demonstrated its commitment to fiscal sustainability, including through more than $1 trillion in deficit reduction measures included in the June agreement reached with Congress on raising the US debt limit, and Biden’s proposal to reduce the deficit by nearly $2.5 trillion over the next decade. .
The change in outlook comes at an uncertain stretch for the bond market. Treasury yields have surged in recent months to 16-year highs on expectations the Federal Reserve will maintain tight monetary policy, as well as fiscal concerns focused on the US.
“Continued political polarization in the US Congress increases the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” Moody’s said.REUTERS
“The sharp rise in US Treasury bond yields this year has increased existing pressures on US debt affordability,” Moody’s said.
Yields, which move inversely to bond prices, have reversed some gains in recent weeks.
“It’s a reminder that time is ticking and markets are getting closer and closer to understanding that we could be entering another period of drama that could eventually lead to a government shutdown,” said Quincy Krosby, chief global strategist at LPL Financial.
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Source: thtrangdai.edu.vn/en/
