Moody’s was the last globally recognized agency to keep the U.S. credit rating at Aaa. Prior to that, another well-known agency Standard & Poor’s downgraded the rating of the world’s largest economy to AA+ back in 2011, and has not revised it upward since then. And then in 2023 Fitch came to the same assessment of the state of the U.S. economy.
In Moody’s the reason for the downgrade of the U.S. economy was a significant increase in public debt and interest rates over the past 10 years.
“The U.S. administration and Congress have failed to reach agreement on measures to reverse the trend toward significant annual budget deficits and rising interest costs,” Moody’s argued their decision.
It is noted that the U.S. federal debt has risen sharply over the past 10 years due to persistent budget deficits, and tax cuts have reduced government revenues, while federal spending has increased.
The federal budget deficit, which amounted to 6.4% of GDP in 2024, is expected to rise to 9% by 2035. In addition, U.S. government debt is projected to increase to 134% of GDP by 2035, up from 98% of GDP in 2024.
International financial experts do not expect a serious impact of Moody’s decision on the US stock market and global financial markets in general in the short term. But they note that the credit rating downgrade reflects the structural crisis in the U.S. and the possible slide of the country’s economy into recession. In this context, experts note that much will depend on the actions of the U.S. Federal Reserve System. In its decisions, the Fed rarely relies on credit ratings, but it cannot ignore the risks to the country’s economy, so it may resort to changing interest rates to maintain stability.
