Moody’s Corp. (MCO) has lowered the outlook on the credit rating of the U.S. to “negative” from “stable.”
The change in the outlook falls short of an actual downgrade to America’s credit rating, which Moody’s maintained at its highest level of ‘AAA.’
However, in lowering the outlook on America’s credit rating to “negative,” the ratings agency cited the nation’s deteriorating fiscal position and increasingly polarized politics as long-term risks to the economy.
Moody’s also singled out threats posed by rising interest rates, a mounting debt load, and a gridlocked Congress that has been unable to agree on ways to reduce the U.S. budget deficit.
The U.S. government ran a $2.02 trillion U.S. budget deficit for the fiscal year ended Sept. 30, which was nearly double the $1.02 trillion U.S. deficit of the previous year.
America’s budget deficit is growing at its fastest rate since 1950, according to an analysis by JPMorgan Chase (JPM).
This is not the first ratings change issued against the U.S. government. In August of this year, Fitch Ratings lowered its U.S. long-term rating to ‘AA+’ from ‘AAA.’
Fitch’s downgrade came two months after the U.S. narrowly avoided defaulting on its debt payments for the first time, an event that would have caused a global financial shock.
Moody’s warning comes as the U.S. federal government in Washington, D.C. faces the prospect of a shutdown next week if politicians in Congress don’t come to agreement on a new spending plan.
The ratings agency said it did not officially downgrade the U.S. credit rating because of America’s credit strength and the role of the U.S. dollar as the world’s reserve currency.
Treasury and White House officials said that they disagree with the change in the outlook by Moody’s.
The stock of Moody’s Corp. has risen 25% this year and currently trades at $344.57 U.S. per share.