Moody’s lowers US credit rating outlook


International credit rating agency Moody’s confirmed the credit rating of the USA as “Aaa” and reduced the country’s credit rating outlook from “stable” to “negative” due to increasing downside risks regarding financial strength.

In the statement made by Moody’s, it was stated that the credit rating of the USA was confirmed but its outlook was revised to negative. The organization assessed that the downside risks to the financial strength of the United States have increased and that this situation cannot be fully balanced by the country’s unique credit strength.

Moody’s statement emphasized that, in the context of high interest rates, the US’s fiscal deficits are expected to remain large unless effective fiscal policy measures are taken to reduce government spending or increase revenues. It was also stated that the ongoing political polarization in the US Congress increases the risk that successive governments will not be able to agree on a fiscal plan that will slow the decline in debt affordability.

Moody’s announced that it expects federal interest payments to rise to around 26 percent and 4.5 percent of income and GDP by 2033, from 9.7 percent and 1.9 percent in 2022, respectively.

The credit rating agency emphasized that the solvency of debts beyond the debt burden determines the financial strength for a country that is considered a reserve currency, and said, “As a result, in the absence of measures to limit the size of fiscal deficits, financial strength will put increasing pressure on the credit profile of the USA. ” He expressed an opinion as follows:

Moody’s forecasts also include an expectation of higher interest rates in the long run. In this context, according to the credit rating agency, the 10-year average Treasury yield will peak around 4.5 percent in 2024 and decrease to around 4 percent in the medium term.

In the statement, it was stated that “In a period when financial strength is weakened, there is an increased risk that political divisions may hinder policy actions that will slow the deterioration in debt affordability and further limit the effectiveness of policy-making,” and that this situation emphasizes the increasing political risk on the financial situation of the United States and the overall country credit profile. .


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