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Moody’s has slashed the credit rating of the U.S., bringing it down a notch to Aa1 from the highest triple-A rating, over the government’s massive budget deficit and high interest rates.
The move sees Moody’s catch up with the other two major credit rating agencies, which both downgraded the U.S. some time ago.
The agency said it did not see a real effort by the government to cut spending and that it expected the U.S.'s fiscal performance to deteriorate compared with other highly developed economies.
It further said that President Donald Trump’s tariffs will significantly hurt the nation's long-term growth and that it expects the federal debt burden to rise to about 134 percent of GDP by 2035.
“This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in a statement.
The U.S. has a massive budget deficit of $1.05 trillion, year to date, and 13 percent higher than a year ago. Interest costs for Treasury debt continue to climb due to higher rates and from having more debt to finance.
Moody’s has held U.S. sovereign debt at the highest credit rating possible for the longest, with rival agencies Standard & Poor’s having downgraded the country to AA+ from AAA in August 2011, and Fitch Ratings having done the same in August 2023.
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