Moody's downgrades United States credit rating on increase in government debt
3 minute readPublished: Friday, May 16, 2025 at 9:27 pm
**Moody's Downgrades US Credit Rating, Citing Rising Debt and Deficits**
In a significant move, Moody's Ratings has downgraded the United States' credit rating from the coveted AAA to Aa1, citing concerns over the escalating government debt and its impact on the nation's finances. This decision, announced on Friday, places the agency in line with its competitors, Standard & Poor's and Fitch Ratings, which have previously downgraded the U.S.
The primary driver behind the downgrade is the substantial increase in government debt and interest payment ratios over the past decade. Moody's highlighted the burden of high interest rates and the persistent budget deficit, which totaled $1.05 trillion year-to-date, 13% higher than the previous year. While tariffs provided some relief last month, the underlying issues remain.
Moody's pointed to the failure of successive administrations and Congresses to implement measures to curb the growing fiscal deficits and interest costs. The agency expressed skepticism about the effectiveness of current fiscal proposals in achieving significant, multi-year reductions in mandatory spending and deficits.
The downgrade triggered market reactions, with the benchmark 10-year Treasury yield rising and the iShares 20+ Year Treasury Bond ETF falling. Experts like Peter Boockvar, chief investment officer at Bleakley Financial Group, noted the symbolic significance of the downgrade, signaling concerns about the U.S.'s strained debts and deficits. The news also comes as the GOP-led House Budget Committee rejected a sweeping package for President Trump's agenda that includes extending the 2017 tax cuts.
BNN's Perspective: This downgrade is a serious wake-up call. While the U.S. economy remains robust, the rising debt and deficit levels are unsustainable in the long run. The lack of bipartisan consensus on fiscal responsibility is concerning. It's crucial for policymakers to address these issues proactively to maintain investor confidence and ensure the nation's financial stability.
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