Moody's rating was lowered in the U.S. credit rating on Friday, highlighting investors' concerns about the government's growing debt.
Government debt-to-interest payment ratios have grown significantly higher than sovereigns with similar ratings over the decade, reflecting more than a decade of downgrades, which reflects more than a decade of growth. ” the credit rating company said in a statement Friday.
"The continuous U.S. government and Congress failed to reach a consensus on a trend to reverse large annual fiscal deficits and growing interest costs," Moody's added.
Moody's also highlighted recent policy uncertainty in the United States driven by Trump's evolving trade policy.
Moody's is the last of the three major credit rating agencies that downgrade U.S. government debt. In August 2011, Standards and Poor lowered the United States from AAA to AA+ and in August 2023 Fitch rating reduces credit rating A gap from AAA to AA+.
Moody's said it expects the federal deficit to grow from 6.4% of GDP in 2024 to 9% by 2035, which is "an increase in debt payments, rising entitlement spending and relatively low income generation."
Credit downgrade is coming House Budget Committee refuses on Friday President Trump's domestic policy bill will extend taxes from his first term.
Moody's said Friday that if the 2017 tax cuts and work bill is extended, it will add $4 trillion to the major federal deficit (excluding interest payments) over the next decade.
The Congressional Budget Office program for publicly held federal debt will rise to 118% from 100% of GDP in 2035. In 1946, this would exceed 106% of the previous ones.
Despite the lower debt, Moody's perception of the United States has changed from negative to stable. Credit institutions said the U.S. “remains outstanding credit advantages such as the size, resilience and vitality of its economy and the continued role of the U.S. dollar as a global reserve currency.”
Another advantage, Moody's said, is the country's record of "very effective monetary policy led by an independent Federal Reserve."