Moody's downgrades US credit rating

Moody's Ratings downgraded the US long-term issuer and senior unsecured ratings to 'Aa1' from 'Aaa' and changed the outlook to stable from negative.

In a statement, the credit rating agency said, "This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns."

Successive US administrations and Congress failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs, Moody's said.

"We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration," it noted.

Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher. The US' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.

Since the beginning of 2025, the US fiscal deficit totaled $1.05 trillion, marking a 13% increase year-on-year. However, growth in tariff revenues helped ease some of the pressure last month.

S&P downgraded the US credit rating from 'AAA' to 'AA+' in August 2011, and Fitch took the same step in August 2023.