The US has already given up on its last perfect credit rating as Moody’s, the influential rating firm, expressed concern about the government’s ability to pay back its debt.
By way of lowering the US AAA rating to Aa1, the rating firm noted that the success of the US administration has gone on to fail to reverse the ballooning deficit as well as the interest costs.
It is well to be noted that AAA rating happens to be the highest possible credit reliability of any country and also indicates that it is considered to be on a very balanced and good financial health with a robust capacity to repay its debts.
In 2023, there was a warning by the Moody’s that the US AAA rating was at risk. Apparently, Fitch Ratings downgraded the US in 2023, and S&P Global Ratings did the very same in 2011. It is worth noting that Moody’s has held a perfect credit rating for the US since 1917.
Moody’s, in a statement said that the downgrade goes on to reflect growth of over a decade in government debt along with interest payment ratios to the levels that are prominently higher than some of the similar rated sovereigns.
The White House, in a statement, said that it was focused on fixing the mess that Biden had created while taking a swipe at Moody’s.
According to Kush Desai, the White House spokesman, if Moody’s had any sort of credibility, they would not have stayed silent as the fiscal disaster took shape over the past four years.
A low credit rating goes on to mean that countries are more likely to go ahead and default on their sovereign debt and mostly face higher borrowing costs.
According to Moody’s, the US happens to retain exceptional credit trends like resilience, size, and dynamism, and also the continued part when it comes to the US dollar being the global reserve currency.
The firm says that it anticipates federal debt to increase to almost 134% of the total GDP by 2035, which is up from the 98% in 2024. It is well to be noted that GDP happens to be a measure of all the economic activities of governments, companies, and people within a country.
Notably, this downgrade has come on the same day as the spending bill suffered a major setback in Congress. Trump, who calls it a big, beautiful bill, failed to go through the House Budget Committee, even with some Republicans also voting against it.
As per the figures that are seen recently, the US economy has shrunk in the first three months of the year as the government spending went on to fall and imports rose because of firms racing to get goods within the country ahead of the tariffs.
The US economy, apparently contracted at an annual rate of 0.3%, which is a sharp dip post the growth of 2.4% in the previous quarter, remarked the commerce department.
