Moody’s lowers US credit rating outlook on the back of debt affordability concerns

Bad news for the US as Moody’s lowers credit rating outlook:Rating agency Moody’s downgraded its outlook on the US’ sovereign credit rating to negative from stable on Friday, reports Reuters. The move was driven by rising fiscal deficits and Treasury yields reaching 16-year highs placing pressure on debt affordability. "It is hard to disagree with the rationale, with no reasonable expectation for fiscal consolidation any time soon," Natixis head economist Christopher Hodge said. "Deficits will remain large ... and as interest costs take up a larger share of the budget, the debt burden will continue to grow."

Remember: Fitch Ratings downgraded the US’ sovereign credit rating from A AA to AA+ in August, citing future fiscal challenges and questions over whether a dysfunctional Congress will continue to be able to raise the debt ceiling when needed.

No change on the horizon: The downgrade was driven by the “continued political polarization” in Congress that looks unlikely to break anytime soon, wrote Moody’s in a statement. "Any type of significant policy response that we might be able to see to this declining fiscal strength probably wouldn't happen until 2025 because of the reality of the political calendar next year," Moody’s senior vice president William Foster told Reuters in an interview.

THE CLOSING BELL-

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