The United States has lost its last perfect credit rating, with Moody’s lowering its rating from ‘AAA’ to ‘Aa1’. This downgrade reflects concerns over the government’s ability to pay back its debt, which has increased significantly over the past decade. The White House has responded to the downgrade, criticizing Moody’s for not speaking out during the “fiscal disaster” of the past four years.
Moody’s cited the high level of government debt and interest payments as reasons for the downgrade. However, the firm maintained that the US retains strong credit strengths, including its size, resilience, and dynamism. The agency expects federal debt to increase to 134% of gross domestic product (GDP) by 2035.
The US economy also faced challenges in the first quarter of the year, contracting at an annual rate of 0.3%. This downturn was driven by a sharp decline in government spending and a surge in imports due to firms rushing to get goods into the country ahead of tariffs.
As the US loses its perfect credit rating, countries are more likely to default on their sovereign debt, and borrowing costs rise. The downgrade comes at a time when the economy is facing uncertainty, with Trump’s landmark spending bill failing to pass the House Budget Committee.
Source: https://www.bbc.com/news/articles/c4ge0xk4ld1o