Moody’s downgrades US’ credit rating for first time since 1917

(MENAFN) Moody’s has downgraded the United States’ credit rating for the first time since 1917, citing growing concerns about the country’s ability to manage its debt. The agency lowered the rating from the highest possible level of AAA to Aa1, aligning with other major credit agencies. In August 2023, Fitch Ratings downgraded the US to AA+ from AAA, while Standard & Poor’s made a similar move in 2011.

Moody's attributed the downgrade to the significant increase in US government debt and the rising ratio of interest payments, which have surpassed levels seen in other similarly rated countries. The agency pointed out that multiple US administrations and Congress have failed to address the pattern of growing fiscal deficits and higher interest costs.

Despite the downgrade, Moody’s acknowledged the US's strengths, including its economic size, resilience, and the role of the dollar as the global reserve currency.

Earlier this month, Treasury Secretary Scott Bessent warned of a potential default by August unless the debt ceiling is raised or suspended. The US government hit its borrowing limit of $36.1 trillion in January, and its total debt now stands at $36.2 trillion. The Treasury has been using "extraordinary measures" like suspending contributions to retirement funds to prevent a default.

Under former President Joe Biden, the debt ceiling was raised three times. Current President Donald Trump has called for the debt ceiling to be eliminated altogether, arguing it is unnecessary if it is consistently raised. White House spokesperson Kush Desai responded to the downgrade by questioning Moody’s credibility, stating that the agency would have spoken out sooner if it had been concerned about the past fiscal years and blaming the current situation on the previous administration’s management.

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