Moody's Lowers Ratings Outlook for US Government to Negative

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ICARO Media Group
Politics
10/11/2023 22h11

Moody's Investors Service has downgraded its ratings outlook for the United States' government from stable to negative, citing increasing risks to the nation's fiscal strength. The long-term issuer and senior unsecured ratings of the U.S. have, however, been affirmed at Aaa by the ratings agency.

Moody's expressed concerns about the lack of effective fiscal policy measures to reduce government spending or increase revenues in the face of higher interest rates. The agency expects the U.S.'s fiscal deficits to remain substantial, significantly compromising debt affordability. Moody's also attributed part of the dilemma to political brinkmanship in Washington, noting that continued polarization within the U.S. Congress raises the risk of an inability to reach consensus on a fiscal plan to address declining debt affordability.

Nonetheless, Moody's acknowledged that the U.S. is expected to maintain its exceptional economic strength, which contributes to retaining the Aaa rating. The agency suggested that positive growth surprises could potentially slow down the worsening of debt affordability over the medium term.

Deputy Secretary of the Treasury, Wally Adeyemo, responded to Moody's decision, expressing disagreement with the shift to a negative outlook. Adeyemo stated that despite the shift in outlook, the American economy remains strong and highlighted Treasury securities as the leading safe and liquid asset worldwide.

Moody's alteration in outlook comes at a time when Congress faces the looming threat of a government shutdown. The current funding for the government is scheduled to last until November 17, but lawmakers in Washington are in disagreement over a bill before the deadline.

Newly elected House Speaker, Mike Johnson (R-La.), has announced plans to release a Republican government funding proposal on Saturday. The proposal aims to provide funding for certain parts of the government through December 7, and other parts through January 19, in a laddered continuing resolution (CR). However, this plan is unlikely to pass in the White House or the Democratic-controlled Senate.

The White House press secretary, Karine Jean-Pierre, attributed Moody's decision to change the U.S. outlook to Congressional Republican extremism and dysfunction.

Additional information will be provided as this story develops.

Note: This news article is based on the information provided and only includes entities, numbers, and dates mentioned in the context.

The views expressed in this article do not reflect the opinion of ICARO, or any of its affiliates.

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