23-05-2025 14:50
US loses top Moody’s credit rating for first time in decades
In a surprising move, rating agency Moody’s downgraded the United States’ long-term issuer and senior unsecured debt ratings from Aaa to Aa1, prompting concern across financial markets and renewed debate among analysts and economists.
According to Moody’s, the downgrade reflects the persistent deterioration of the US fiscal position. The outlook on the rating has been revised from negative to stable, signaling that while the country still retains strong institutional and economic fundamentals, its worsening debt dynamics cannot be ignored.
This one-notch downgrade is significant for a country that has long held Moody’s highest possible credit rating. The agency cited the growing federal debt and rising interest payments, which now far exceed those of other nations in the same rating tier.
“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s said in its statement.
The agency projects that by 2035, the US federal deficit could grow to 9% of GDP, up from 6.4% in 2024. During the same period, the national debt could climb to 134% of GDP, with interest payments consuming as much as 30% of federal revenue.
Despite the downgrade, Moody’s emphasized that the change does not reflect a loss of confidence in the strength of US institutions or the core framework of the Federal Reserve’s monetary policy.
“The US retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency,” the agency noted.
Still, Moody’s warned that fiscal pressures are weighing on America’s credit profile. Although the risk of an acute financial crisis remains low thanks to strong demand for US Treasuries, any future upgrade back to Aaa will depend on “the implementation of fiscal reforms to significantly slow and eventually reverse the deterioration in debt affordability and fiscal deficits.”
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Published 23 May 2025
© InstaFintech Group
© InstaFintech Group
