© Getty Images / imagedepotproFILE PHOTO: People on busy Wall street in Manhattan.
This adjustment comes amid the looming threat of a government shutdown, with funding secured until November 17, and newly elected House Speaker Mike Johnson revealing a Republican government funding plan.
Against the backdrop of higher interest rates, Moody's is emphasizing the need for effective fiscal policy measures to address large fiscal deficits, warning that, without such measures, debt affordability could significantly weaken. The agency attributes part of the risk to ongoing political polarization in Congress, raising concerns about reaching a consensus on a fiscal plan. Despite the negative outlook, Moody's expects the US to maintain its exceptional economic strength, suggesting that positive growth surprises could slow the deterioration in debt affordability.
As the government faces potential funding challenges and political gridlock, Moody's decision aligns with a trend seen in August, when Fitch downgraded the US long-term foreign currency issuer default rating. Moody's is now the sole major credit company maintaining a top rating on the US, with S&P Global Ratings having stripped the country of its top score in 2011.
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