Moody’s Investors Service late Friday cut the outlook on the U.S. sovereign credit rating to negative from stable, citing higher interest rates and doubts about the government’s ability implement effective fiscal policies.
A negative outlook means that a rating may be cut in the future, but doesn’t mean that it will be. Moody’s continues to rate U.S. sovereign debt Aaa — the only one of the three major credit-rating company to maintain a triple-A rating.
“The sharp rise in US Treasury bond yields this year has increased pre-existing pressure on US debt affordability. In the absence of policy action, Moody’s expects the US’ debt affordability to decline further, steadily and significantly, to very weak levels compared to other highly-rated sovereigns, which may offset the sovereign’s credit strengths explained below,” the company said, in a statement.
Moody’s said the rating could be cut if the company concludes that policy makers were unlikely to respond to the country’s growing fiscal challenges over the medium term, through measures to increase government revenue or structurally reduce spending to slow the deterioration in debt affordability.