OR Moody’s Ratings removed from the USA The top credit rating, reflecting the increasing concern that the inflated debt and the deficits will harm America’s position as a destination for world capital and increase the cost of borrowing the government.
As Bloomberg reports, Moody’s reduced US credit rating to AAA by AAA on Friday, following Fitch Ratings and S&P Global Ratings in the degradation of the world’s largest economy under its top, triple position A. The reduction by one year comes more than a year after Moody’s has changed its outgoing views. The US is now stable prospects.
“While we recognize the significant financial and financial advantages of the US, we believe that they no longer fully compensate for the decline in fiscal figures,” Moody’s wrote in a statement.
Moody’s has accused successive governments and Congress of enlarging fiscal deficits that, he said, do not show signs of retreat. On Friday (16.05.2025), MPs in Washington continued to work for a huge tax and expenditure bill that is expected to add trillions to federal debt in the coming years.
The White House described this move as a political decision on Friday. Steven Chang, a spokesman for President Donald Trump, stood out Mark Zadi, an economist at Moody’s Analytics, in a post on X, accusing him of being a long -standing critic of government politicians.
“No one takes his ‘analysis’ seriously. It has proven to be wrong again and again, “Chang said. Moody’s Ratings is a separate group from Moody’s Analytics.
The reaction to the large financial markets was immediate in response to the decision, with government bond yields on the 10 -year bond increasing by up to 4.49%. An ETF watching the S&P 500 fell 0.6% to Electorical Transactions.
“Degradation may indicate that investors will require higher yields on government bonds,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management. While US assets have recovered in response to previous US and S&P downgrades, “it remains to be seen whether the market reacts differently, as the character of government bonds and dollar as shelters may be somewhat uncertain.”
This change comes at a time when the federal budget deficit is approaching $ 2 trillion a year, or more than 6% of gross domestic product. A weaker American economy in the wake of a world tariff war is going to increase the deficit, as government spending usually increases when activity slows down.
This perspective comes as the total level of US debt has already surpassed the magnitude of the economy in the wake of the waste of pandemic lending. The highest interest rates in recent years have also raised the cost of government debt.
In May, US Finance Minister Scott Bessed, who has pointed out the 10 -year yields as a key measure, told MPs that the US was in a unsustainable trajectory: “debt numbers are truly scary” and a crisis would mean “a sudden.” “I have committed that this will not happen.”