Moody's outlook on US debt degraded from stable to negative one week prior to crucial budget negotiations in Congress.
Momentarily, the agency retained its Aaa rating on US government debt. On this, the US Treasury immediately reflected against the Moody's decision.
Deputy Secretary of the Treasury Wally Adeyemo stated that the U.S. economy continues to be robust, and Treasury securities are globally recognised as the leading secure and easily tradable financial assets.
Furthermore, Adeyemothe conveyed that the Biden Administration has showcased its dedication to maintaining fiscal stability. This is evident in the measures taken, such as achieving over USD 1 trillion in deficit reduction through the June debt limit agreement and the proposed budget by President Biden, which aims to reduce the deficit by nearly USD 2.5 trillion in the coming decade, he added.
The US budget deficit has widened to USD 1.7 trillion as published last month for the 2023 fiscal year ending September 30.
The cost of debt for the United States skyrocketed because of interest rate hikes by the US central bank to curb inflation, with Washington paying USD 162 billion more for interest in the last fiscal year compared to 2022.
The fact that Moody's is the only significant agency to keep its rating for US sovereign debt at its highest level highlights the possible economic risk to the US of failing to reach an agreement to keep the government funded in one week's time.
Government funding runs out at midnight on Friday into Saturday, and neither the Republican-led House of Representatives nor the Democratic-controlled Senate have enacted a bill to extend it.
In the event of a disagreement by November 17, the greatest economy in the world might experience a "government shutdown."