Moody’s Investors Service recently made a pivotal move, lowering its ratings outlook on the United States government from stable to negative.
This shift is rooted in the increasing risks to the nation’s fiscal strength, attributed to factors such as escalating interest rates and a lack of effective fiscal policy measures.
According to Moody’s, the potential for continued political brinkmanship in Washington poses a significant risk. The agency highlighted concerns about political polarization within the US Congress, suggesting that the ongoing divide might hinder the formation of a consensus on a fiscal plan to address the declining debt affordability.
Bonds issued by businesses and governments are the subject of global financial research by Moody’s Investors Service. Moody’s is one of the “Big Three” credit rating firms, along with Standard & Poor’s and Fitch Group. The Fortune 500 list for 2021 includes it as well.
A negative outlook does not guarantee a rating cut; it only indicates that one may occur in the future. Out of the three major credit rating agencies, Moody’s is the only one to keep the triple-A rating on the largest economy in the world for US sovereign debt.
Moody’s Caution Amidst Government Shutdown Threat
The move by Moody’s comes at a critical juncture, coinciding with the looming threat of a government shutdown. The ratings agency maintained the long-term issuer and senior unsecured ratings of the US at Aaa, indicating a cautious optimism about the nation’s economic strength.
As Congress grapples with funding decisions, the agency’s decision adds a layer of complexity to the already challenging political landscape. The US government is currently funded through November 17, but a lack of agreement on a bill before the deadline raises concerns.
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While Moody’s maintained the US’s
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Author: Christian Encila
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