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Moody’s Downgrades U.S. Credit Rating, Ending Era of Triple-A Status

The U.S. now holds a AA+ stable rating as rising debt, persistent deficits, and political gridlock undermine fiscal credibility, forcing portfolio adjustments worldwide.

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Overview

  • Moody’s has downgraded the U.S. sovereign credit rating to AA+ stable, citing surging debt levels and the inability of Congress and successive administrations to address growing fiscal deficits.
  • This marks the removal of the last triple-A rating for the U.S., following similar downgrades by S&P in 2011 and Fitch in 2023, placing the country in the second tier of global finance alongside nations like Japan and the UK.
  • The downgrade coincided with Congress blocking President Trump’s tax and spending bill, which proposed $5.6 trillion in additional deficits, in a significant legislative setback for his administration.
  • Institutions restricted to holding AAA-rated securities, such as central banks and sovereign wealth funds, may now be compelled to reduce their U.S. debt holdings, potentially impacting global financial markets.
  • Moody’s decision reflects broader concerns over U.S. governance, with rising interest costs, partisan gridlock, and challenges to Federal Reserve independence further eroding confidence in the country’s fiscal and monetary stability.