Moody's downgrades US credit rating from Aaa to Aa1 citing rising debt

From Yahoo Finance: 2025-05-16 18:40:00

Moody’s Ratings downgrades U.S. credit rating from Aaa to Aa1 due to rising debt and interest payment ratios. Lack of agreement on reversing fiscal deficits cited. Lower ratings could mean higher borrowing costs for consumers. This follows Fitch Ratings’ downgrade in 2023 and S&P’s downgrade in 2011. Federal debt has sharply risen from continuous deficits and increased spending, while the latest GOP tax bill draft could add $4 trillion to the deficit. Federal deficits expected to widen, impacting interest payments, entitlement spending, and revenue generation. Despite the downgrade, U.S. retains exceptional credit strengths like its economy and the U.S. dollar as the global reserve currency. Policy uncertainty noted, but Moody’s expects effective monetary policy led by the Federal Reserve. Lower rating could lead to higher Treasury bond interest rates, impacting borrowing costs for consumers, although immediate impact on Treasury yields has been minimal. Long-term implications suggest continued fiscal expansion without debt stabilization efforts may affect borrowing costs and economic flexibility.



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