Moody’s on Friday downgraded its credit rating of the United States by a notch to “AA1” from “AAA,” citing rising debt and interest “that are significantly higher than similarly rated sovereigns.”
U.S. President Donald Trump’s sweeping tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress.
As written, the bill would add trillions of dollars to the federal government’s $36.2 trillion in debt over the next decade.
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“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s said in a statement.
Moody’s was the last among major ratings agencies to keep a top, triple-A rating for U.S. sovereign debt, though it had lowered its outlook in late 2023 due to wider fiscal deficit and higher interest payments.
On Friday, the agency changed its outlook on the U.S. to “stable” from “negative.”
It typically “resolves” an outlook, meaning in case of a negative outlook it either brings it back to stable or goes ahead with a rating downgrade, within 18 to 24 months, so an update to its rating was likely at some point this year.
U.S. Treasury securities fell and yields rose late Friday after the news.
