Moody’s Investors Services cut its rating outlook on the government of the United States to negative on Friday. It cited rising risks to fiscal strength and brinkmanship as reasons for the lowering of the nation’s outlook. The earlier rating of the U.S. government was stable. The Treasury Department said that it disagreed with Moody’s outlook.
Moody’s affirmed the long-term issuer and senior unsecured ratings of the nation at Aaa. The rating agency said that the Aaa rating had been given as it expects the U.S. to “retain its exceptional economic strength.”
Moody’s cut the U.S. outlook to negative and cited reasons including “higher interest rates” that were not balanced with reduced government spending nor with increased revenue.
The rating agency also said that the polarization in Congress that continues despite a need to reach consensus on a fiscal plan that is essential “to slow the decline in debt affordability” was also a contributing factor for the agency’s ratings.
Deputy Secretary of the Treasury Wally Adeyemo released a statement that partly disagreed with the ratings of Moody’s. It said, “While the statement by Moody’s maintains the United States’ Aaa rating, we disagree with the shift to a negative outlook.”
It also stated, “The American economy remains strong, and Treasury securities are the world’s preeminent safe and liquid asset.”
Earlier in August, Fitch had also changed the U.S. long-term foreign currency issuer default rating from AAA to AA+. The rating agency said that it had lowered its rating as it expected “fiscal deterioration” in the next three years as well as issues in governance. It also mentioned the increasing debt burden.
Congress is facing an imminent shutdown in the near future. As of now, funds are available till November 17. However, lawmakers remain at opposite poles over a bill and it is expected that there will be a lot of discord in Washington before the November deadline.
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