A. M. Moody’s rating agency Moody’s withdrew its triple-A rating on US sovereign debt, downgrading it to Aa1. This decision represents a setback for the discourse of economic soundness promoted by President Donald Trump and comes amid political tensions in Congress, where Republicans blocked the progress of a key project of the Executive.
Moody’s justified the downgrade by pointing to the persistent increase in public debt levels and interest costs, which already far exceed those of other economies with similar ratings. The agency warned that neither the current fiscal proposals nor the ongoing negotiations offer an effective solution to curb the country’s large annual deficits.
The decision follows similar actions taken by other rating agencies such as S&P and Fitch in previous years. Moody’s highlighted that the fiscal deterioration has been accentuated after the covid pandemic and warned that, if structural measures are not taken, the United States will face an even more complex economic scenario during the next decade.
Despite the downgrade, Moody’s changed the country’s outlook from negative to stable, recognizing strengths such as the size of its economy, its dynamism, and the role of the dollar as a global reserve currency. However, the agency warned that a loss of confidence in the dollar or a more accelerated fiscal deterioration could lead to a significant increase in interest rates.
The agency urged the U.S. government to implement urgent fiscal reforms to reverse the current trend. Otherwise, the rising cost of debt could have serious implications not only for public finances, but also for global economic stability.
