Markets

published : 2023-11-11

US Credit Rating Outlook Lowered to 'Negative' by Moody's as Shutdown Looms

Investor services company cites 'political polarization' in Congress as a factor

Image prompt: A close-up shot of the U.S. Capitol building in Washington, D.C., taken with a Canon EOS 5D Mark IV.

The U.S. credit rating outlook was lowered from 'stable' to 'negative' this week by Moody's Investors Services as another government shutdown looms.

Moody's cited continued political polarization within U.S. Congress as a major concern, raising the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.

In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US' fiscal deficits will remain very large, significantly weakening debt affordability.

House members are currently attempting to hash out a temporary spending measure to avoid a government shutdown next Friday.

Image prompt: A group of congress members engaged in a heated debate on the House floor, taken with a Nikon D850.

Republicans in the House are expected to release a temporary spending measure on Saturday, as negotiations led by newly elected House Speaker Mike Johnson continue before federal funding runs out.

Deputy Treasury Secretary Wally Adeyemo disagreed with Moody’s shift to a negative outlook, stating that the American economy remains strong and Treasury securities are the world’s preeminent safe and liquid asset.

White House spokesperson Karine Jean-Pierre called the credit rating outlook downgrade 'yet another consequence of congressional Republican extremism and dysfunction.'

While Moody's maintained the United States' AAA credit rating, both S&P and Fitch have downgraded it to AA+. Fitch made the downgrade in August, while S&P lowered its rating back in 2011.

Image prompt: Treasury securities being traded on the stock market, with financial experts analyzing the data, taken with a Sony A7R III.

The deficit for the budget year that ended on September 30 jumped from $1.38 trillion to $1.7 trillion.

This article has been prepared in collaboration with Reuters.