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Moody’s Downgrades U.S. Credit Rating, Stripping Final AAA Status

The downgrade to Aa1 reflects surging debt, rising interest costs, and political inaction on fiscal reforms.

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The downgrade comes as the Republican-controlled Congress tries to extend tax cuts from President Donald Trump's first term and add new ones.
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Overview

  • Moody’s has downgraded the United States’ credit rating from Aaa to Aa1, citing over a decade of rising debt and interest payment burdens.
  • This marks the first time the U.S. lacks a top-tier credit rating from any of the major agencies, following earlier downgrades by S&P in 2011 and Fitch in 2023.
  • The U.S. fiscal deficit has reached $1.05 trillion so far this year, 13% higher than the same period in 2024, with debt expected to grow to 134% of GDP by 2035.
  • Moody’s highlighted political gridlock and the absence of meaningful reforms to address structural deficits as key factors in its decision.
  • The downgrade may increase borrowing costs for the federal government, potentially impacting global markets and influencing Treasury yields.