Moody’s downgraded the outlook on the U.S. credit rating from “stable” to “negative”

the staff of the Ridgewood blog

Ridgewood NJ, on Friday, Moody’s downgraded the outlook on the U.S. credit rating from “stable” to “negative,” attributing the shift to substantial fiscal deficits and a decline in debt affordability. This decision prompted immediate criticism from President Joe Biden’s administration.

The downgrade follows a similar move by another ratings agency, Fitch, earlier this year, spurred by prolonged political negotiations over the U.S. debt ceiling. Concerns over federal spending and political polarization have heightened among investors, contributing to a selloff that pushed U.S. government bond prices to their lowest levels in 16 years. Moody’s underscored the risk of “continued political polarization” in Congress impeding consensus on a fiscal plan to address the declining debt affordability. While acknowledging the rationale, experts like Christopher Hodge, Chief Economist for the U.S. at Natixis, see challenges in achieving fiscal consolidation. Moody’s, the last of the three major rating agencies to maintain a top rating for the U.S. government, affirmed its long-term issuer and senior unsecured ratings at ‘Aaa’ despite the altered outlook, indicating the possibility of a downgrade over the medium term.

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