Moody's downgrades US credit rating and leaves the country out of the select group of highest confidence

The United States no longer has any top confidence credit rating (triple A) awarded by the world's leading agencies. This Friday, Moody's Ratings downgraded the U.S. government's rating from "AAA" to "AA1," citing rising fiscal deficits and public debt financing costs.

With this decision, Moody's joins Fitch Ratings and S&P Global, which had already downgraded the country's rating in 2023 and 2011, respectively. The new U.S. status puts the country on the same grade as Austria and Finland.

Risks to U.S. debt increase

In its statement, Moody's notes that government spending continues to far outstrip government revenues, with no clear signs of structural change.

The main fear of analysts is that this pace of indebtedness will force the government to pay higher and higher interest rates to attract investors, which could aggravate the fiscal deficit and limit the country's ability to respond to future crises.

In addition, Moody's expressed that none of the budget proposals currently under discussion in Congress offer credible solutions to reduce the gap between spending and revenues. "Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," the firm warned in its statement.

Limited but symbolic impact on markets

Despite the symbolic blow that this downgrade represents, analysts do not anticipate a violent reaction from the financial markets in the short term. The experience of 2011, when S&P downgraded the US rating, showed that Treasury bonds can still be perceived as safe assets even in contexts of uncertainty.

However, some experts warn that Moody's downgrade may influence global perceptions about the country's financial stability. Foreign investors could demand higher interest rates to buy Treasury bonds, which would further increase the fiscal burden.