A credit rating agency, Moody's, has lowered the U.S.'s top credit rating grade.

A credit rating agency, Moody's, has lowered the U.S.'s top credit rating grade.

Get the latest scoop as Moody's Investors Service strips the U.S. of its "Triple A" rating, giving it a "Aa1." The White House unleashes a scathing response towards the rating agency.

In a shocking move, Moody's slammed the brakes on the U.S., downgrading its credit rating from "Aaa" to "Aa1" and pegging the outlook as "stable." The finance giants pointed to the country's dreadful fiscal situation, which they expect to plummet even deeper compared to previous times, and compared to other highly-rated countries.

Politics: White House Rushes to Defend Trump, Attacks Moody's Economist

Steve Cheung, the White House's communications director, didn't mince his words in attacking Moody's economist Mark Zandi, branding him a political opponent of President Donald Trump. "No one takes his 'analysis' seriously. He has been wrong time and time again," Cheung said.

For years, Moody's had been the last major rating agency clinging to the U.S.'s "Triple A" rating. Standard & Poor's dropped it in 2011, and Fitch followed suit in 2023. In November 2023, Moody's warned the U.S. of an imminent downgrade, shifting its outlook from "stable" to "negative."

Lower ratings mean higher costs for countries when borrowing money, and this downgrade could mean more expensive borrowing costs for the U.S.

Economy: U.S. Government's Fiscal Policy under Fire

In a public statement published after market hours, Moody's criticized successive U.S. governments and Congress for their failure to rectify the persisting trend of massive annual budget deficits and surging interest expenses. The federal debt-to-GDP ratio is projected to skyrocket to around 134% by 2035, up from 98% in 2024. Moody's also didn't see any indications that the proposed budget plans would result in substantial multi-year reductions in mandatory spending.

Regarding the controversial tariffs imposed by President Trump, Moody's suggested a temporary drop in GDP growth as the economy readjusts but maintained that the U.S.'s long-term growth would not suffer significantly. The agency underscored the U.S.'s economic strength, including its powerful economy, the role of the U.S. dollar as a global reserve currency, and the resiliency and dynamism of the U.S. economy. Moody's remains confident that the Federal Reserve will maintain effective monetary policy under its guidance.

In essence, Moody's downgrade paints a critical picture of the U.S.'s fiscal management, raising worries about the country's future financial stability, borrowing costs, and investor confidence. The downgrade also puts pressure on policymakers to address the deep-seated fiscal challenges to avoid further credit rating deterioration.

Sources: ntv.de, mau/rts

• Rating Agencies
• Moody's
• United States
• Fiscal Policy
• Deficit
• Donald Trump

Enrichment Data

• Fiscal Concerns Escalate: Moody's downgrade marks the first time the U.S. has lost its top-tier rating from all three major agencies—Moody’s, Standard & Poor’s, and Fitch. The downgrade results from persistent increases in federal government debt and interest payment ratios that exceed those of similarly-rated sovereigns, the inability of administrations and Congress to implement measures to reverse the trend of large fiscal deficits, and growing interest costs.
• Fiscal Sustainability: The concerns about the U.S.’s long-term fiscal sustainability grow, as Moody's projects federal deficits to expand from 6.4% of GDP in 2024 to 9% by 2035 due to escalating entitlement program costs and interest payments.
• Higher Borrowing Costs: Losing the "Triple A" rating could lead to increased borrowing costs for the U.S., as investors may demand greater yields to compensate for the heightened credit risk. This would add to the strain on federal debt financing over time and could exacerbate the fiscal imbalance.
• Market and Political Impact: The downgrade might erode investor confidence and trigger greater scrutiny of U.S. fiscal policies. Politically, it increases the pressure on policymakers to solve structural fiscal challenges to prevent further credit rating degradation.

Despite the downgrade, Moody's modified the outlook to stable from negative, suggesting that the current state is unlikely to worsen rapidly but acknowledging that credible action needs to be taken to enhance fiscal metrics. The U.S.'s economic strengths remain, albeit with the emphasis on the importance of managing debt and deficits with prudence for the future.

1. The White House criticizes Moody's economist Mark Zandi, labeling him a political opponent of President Donald Trump, following the downgrade of the U.S.'s credit rating by Moody's Investors Service.
2. The downgrade by Moody's indicates a critical picture of the U.S.'s fiscal management, raising concerns about future financial stability, borrowing costs, and investor confidence due to persistent increases in federal government debt and interest payment ratios.

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