Moody's downgrades US credit rating outlook

Moody's has changed the outlook for the US rating to a negative one.

Due to the substantial budget shortfall and the aggressive negotiating tactics, a decision was made.

The agency affirmed the nation's AAA rating for the long-term. Simultaneously, it was confirmed.

Moody's has changed its outlook for the US credit rating from stable to negative, while still maintaining the country's long-term rating at AAA, according to Bloomberg.

The agency stated in a statement that the potential risks to the fiscal sustainability of the United States have grown, and can no longer be completely counterbalanced by the nation's exceptional creditworthiness.

Without any action taken to reduce government spending or increase revenue, the US budget deficit will remain very high even with the rise in interest rates.

Due to Washington's "brinkmanship" policy and the "ongoing political polarization within the US Congress," the agency stated that the decision was made, as it could cause difficulties in adopting the budget plan.

The US Treasury Department contested Moody's judgement, asserting that "the American economy is still robust, and Treasury securities are a secure and liquid asset globally."

Moody's is the only one of the three major agencies that has kept its highest rating for the United States, while Fitch lowered it from AAA to AA+ in August and S&P has held it at AA+ since 2011.

Fitch's downgrade of the US credit rating was due to the anticipated worsening of the nation's financial situation in the next three years and the rise in the already high debt load.

The US Treasury reported that the budget deficit for the 2023 fiscal year, which ended on September 30th, had risen by $320 billion to a total of 1.7 trillion, in mid-October.

In June, the US national debt hit a record high of $32 trillion. However, this was surpassed in September when the debt exceeded $33 trillion. To prevent a technical default, a law was passed that suspended the national debt ceiling until 2025.

The US Congress and President Biden have passed a compromise bill to keep the federal government funded, which will expire on November 17.

Unless the US authorities adopt a new document by now, a "shutdown" will take place and the government will be forced to halt operations due to lack of funding.