Moody’s Downgrades US Credit Rating to ‘Aa1’, Ending Era of Perfect Credit
In a historic move, Moody’s has stripped the United States of its last remaining perfect credit rating, downgrading it from ‘AAA’ to ‘Aa1’. The decision, announced on Friday, comes as a result of mounting concerns over debt sustainability and increasing interest costs.
This downgrade marks the first time since 1917 that Moody’s has not assigned a top-tier rating to U.S. government bonds. This latest blow follows previous downgrades by S&P Global Ratings in 2011 and Fitch Ratings in 2023, solidifying the end of the U.S.’s long-standing status as a triple-A borrower.
Moody’s cited a significant and sustained rise in the federal debt burden and interest payment ratios as the basis for their decision. They project that U.S. debt will reach 134% of GDP by 2035, a sharp increase from 98% in 2024.
Despite acknowledging America’s economic strengths, such as its robust economy and the dominance of the U.S. dollar, Moody’s highlighted political gridlock and fiscal policy uncertainty as major risk factors.
In response, the White House shifted blame to the previous administration, stating, “We are focused on fixing Biden’s mess.” White House spokesman Kush Desai criticized Moody’s for not addressing the fiscal challenges of the past four years.
This credit downgrade came at a time when President Donald Trump’s proposed $2 trillion spending bill faced a setback in the House Budget Committee. Several Republican members broke ranks, preventing the bill from advancing.
Simultaneously, the U.S. economy showed signs of slowing, with the Commerce Department reporting a 0.3% contraction in GDP in Q1 2025, following 2.4% growth in the previous quarter. The decline was attributed to reduced government spending and increased imports ahead of anticipated tariffs.
This latest development underscores the challenges facing the U.S. economy and raises concerns about its future financial stability. — Agencies
