A credit rating agency, Moody's, downgrades the United States' credit rating from the highest AAA to a lower grade.

Moody's Slaps U.S. with a Credit Downgrade, White House Fires Back with Fiery Rebuttal

A credit rating agency, Moody's, downgrades the United States' credit rating from the highest AAA to a lower grade.

In an evening announcement, Moody's deal a tough blow to the U.S. economy, pulling its top-tier "Triple-A" rating and dropping it to "Aa1." The rating agency also shifted its outlook from "stable" to "stable," citing the U.S.'s deteriorating financial status compared to past times and other high-rated nations. Moody's noted that the U.S.'s powerful economic and financial strengths might not completely offset the decline in fiscal metrics.

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The White House responded with a fierce rebuttal, with Communications Director Steven Cheung slamming Moody's economist Mark Zandi on social media, calling him a political adversary of President Donald Trump. "Folks don't take his analyses seriously. He's been off the bean the entire time," Cheung commented.

Prior to Moody's, Standard & Poor's and Fitch had also downgraded the U.S. in 2011 and 2023, respectively. In November 2023, Moody's had already shifted its outlook for the U.S. to "negative," foreshadowing a potential downgrade in the near future. The decrease in ratings can rack up the costs for nations borrowing money.

Tariffs Federal Reserve

Moody's predicts that the U.S. economy will experience temporary growth slowdown as it adapts to the imposition of tariffs. However, the agency asserts that the long-term growth of the U.S. will remain undamaged. Moody's points to the U.S.'s exceptional strength in areas such as the size, resilience, and dynamism of its economy, as well as the role of the U.S. dollar as a global reserve currency. Despite the turbulence of the recent months due to political uncertainty, Moody's is confident that the U.S. will maintain its legacy of effective monetary policy under the leadership of an autonomous Federal Reserve.

• U.S. Federal Debt
• Moody's
• Fiscal Policy
• Donald Trump

Insights:

• The U.S. credit rating downgrade stems primarily from several issues, including the escalating U.S. government debt, a lack of fiscal reform agreements by successive administrations and Congress, policy uncertainty brought about by shifting trade priorities, and continued increases in federal deficits.
• Moody's expects federal deficits to surge from 6.4% of GDP in 2024 to almost 9% by 2035, fueled by rising interest payments, entitlement spending, and low revenue generation.
• Despite the downgrade, Moody's believes that the U.S.'s powerful economic and financial strengths may offset some of the negative impacts. Nonetheless, the downgrade may lead to an increase in the risks for investors demanding higher yields on U.S. debt.

1. The downgrade in the U.S.'s credit rating by Moody's is largely due to factors such as escalating federal debt, a lack of fiscal reform agreements, policy uncertainty, and increased federal deficits.
2. Moody's has projected that federal deficits will rise from 6.4% of GDP in 2024 to nearly 9% by 2035, driven by factors including interest payments, entitlement spending, and low revenue generation.

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