"Fiscal Soundness Risk" Moody's Downgrades US Credit Rating Outlook from 'Stable' to 'Negative'

Maintaining Top Grade 'Aaa'
Concerns Over Massive Fiscal Deficit... Uncertainty Due to Congressional Political Strife

International credit rating agency Moody's maintained the United States' sovereign credit rating at the highest level of 'Aaa' but downgraded the rating outlook from 'stable' to 'negative.' Moody's is the only one among the three major international credit rating agencies to maintain the U.S. credit rating at the highest level, yet it hinted at the possibility of lowering the rating.

On the 10th (local time), Moody's released a credit rating report on the United States containing this information. In the report, Moody's stated, "The risk to the U.S. fiscal soundness has increased, and the country's inherent credit strengths no longer appear sufficient to fully offset this." It added, "In the absence of effective fiscal policy measures to reduce government spending or increase revenue despite high interest rates, the substantial fiscal deficit will significantly weaken the U.S.'s debt capacity."

Political uncertainty was also cited as a risk factor. Moody's pointed out, "As political polarization continues within Congress, the risk that the administration's fiscal plans to delay the weakening of debt capacity will fail to reach an agreement is increasing."

Earlier, Fitch, also considered one of the three major international credit rating agencies, downgraded the U.S. sovereign credit rating from AAA to AA+ in August. At that time, Fitch explained the downgrade by reflecting "the expected fiscal deterioration over the next three years, increased national debt burden, and governance deterioration." Standard & Poor's (S&P) had already downgraded the U.S. credit rating from AAA to AA+ in 2011.