The Moody’s rating agency worsened the United States’ credit rate on Friday (16 May). This is due to concerns about the growing debt of the country, which is $ 36 trillion (EUR 32.16 trillion). This step can be complicated by President Donald Trump’s efforts to reduce taxes and cause a wave of uncertainty in the world’s financial markets. Inform the Reuters and CNBC.
Moody’s reduced the US rating by one degree from AAA to AA1. The rating view is stable. The decline in the rating was preceded by a deterioration in its outlook in 2023. The agency then cited high fiscal deficits and interest payments as the reason for this decision.
“Surgery of the US and Congress governments failed to agree on measures that would reverse the trend of high fiscal deficits and interest costs,” said Moody’s on Friday.
Moody’s awarded the United States the highest AAA rating for the first time in 1919 and is the last of the three largest rating agencies that reduced it. Standard & Poor’s worsened USA from AAA to AA+ in August 2011 and Fitch Ratings from AAA to AA+ in August 2023.
The reduction of the rating, which was announced on Friday after the market closure, caused an increase in US debt interest rates on Friday. The revenue of the 10-year government bonds in prolonged trading increased by 3 base points to 4.48 %.
The US budgetary deficit is huge, as debt operating costs continue to increase due to higher interest rates and rising debt. The deficit in the ongoing fiscal year, which began on October 1, 2024, is already reaching $ 1.05 trillion, which is 13 % more than in the same period a year ago.
Moody’s Analysts warn that if the 2017 tax reduction law is extended, which they consider to be a basic scenario, the primary federal budget deficit (without interest payments) will increase by approximately $ 4 trillion.
“Therefore, we expect the federal deficit to rise to almost 9 % of gross domestic product (GDP) in 2035 out of 6.4 % in 2024, mainly due to an increase in interest payments, higher social benefits and relatively low income,” said Moody’s. “We assume that the federal debt will increase by 2035 to approximately 134 % of GDP compared to 98 % in 2024.”
