The US has lost its highest credit rating, AAA, completely, following the decision to downgrade by Moody’s, the last of its major credit rating agencies.
Moody’s announced that the US credit rating has been downgraded to AA1 due to rising budget deficits and rising interest costs.
The organization says the growing US government budget deficit has led to a rapid increase in the need for borrowing, which puts pressure on interest rates in the long term. He also noted that the current budget plan discussed in Congress is not sufficient to reduce the permanent imbalance between spending and revenue.
The move follows a similar downgrade by the 2023 Fitch rating and the 2011 S&P Global rating. The US loses its highest credit ratings from all three major rating agencies. Its new credit rating is AA1, at a level already shared with countries such as Austria and Finland.
“All US administrations and Congress have not agreed to measures to reverse the trend of high annual fiscal deficits and rising interest costs,” Moody’s said in a statement.
Downgrades could increase pressure on the US Treasury, which is under pressure from forecasts for higher inflation and rising debt, but experts don’t expect the downgrade to cause significant market turbulence.
In fact, after the S&P downgrade in 2011, the Treasury Department rose due to weak economic outlook. The United States is the world’s largest economy and remains a benchmark for other countries to measure economic reliability.
Still, some investors say the latest downgrade could undermine the US perception of a global trust shelter, leading global investors to demand higher yields on US bonds.
“This could increase the cost of serving debt and further increase the fiscal deficit,” said Michael Gousey, global head of bonds at Principal Asset Management.
*This is not investment advice.