By William Watts
WASHINGTON (Dow Jones)–Moody’s Investors Service could strip the US of its top credit rating. The agency gave the “AAA” rating for the USA a negative outlook. Moody’s pointed to high interest rates and expressed doubts about the government’s ability to implement effective fiscal policy.
A negative outlook means the rating may be lowered in the future. Of the three major rating agencies, only Moody’s rates the USA’s creditworthiness as “AAA”.
“The sharp rise in bond yields this year has added to existing pressures on U.S. debt sustainability,” Moody’s said. “Without policy action, Moody’s expects debt sustainability to continue to decline – steadily and significantly – to very low levels compared to other high-credit countries.”
The Treasury Department contradicted the agency’s warning. “We disagree with the negative outlook. The American economy remains strong and Treasurys are the world’s preeminent safe and liquid assets,” said Deputy Treasury Secretary Wally Adeyemo. The Biden administration’s debt reduction measures have put the US on a healthier footing than Moody’s outlook suggests.
Moody’s also said the rating could be lowered if the agency considers it unlikely that policymakers will respond to growing fiscal challenges in the medium term through measures to increase government revenues or structurally reduce spending Slow down the decline in debt sustainability.
Fitch lowered the US rating to “AA+” in August. S&P had already withdrawn the USA’s top credit rating in 2011.
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(END) Dow Jones Newswires
November 11, 2023 07:16 ET (12:16 GMT)