Moody's Takes a Swipe at U.S., Strips Top Credit Rating
U.S. Loses Top Credit Ranking Given by Moody's
)asterisk bloom #BadCreditUSA 🗑️❗️📈
In a nerve-wracking turn of events, Moody's Investors Service has dealt a heavy blow to the U.S. financial standing by chopping its credit rating from "Aaa" down to "Aa1." The agency hasn't hesitated to label the new outlook as "stable."
Catching everyone off-guard, Moody's dropped the bomb in the evening hours, citing the U.S.'s precarious fiscal situation, which is only expected to worsen compared to the norm for highly-rated nations. Moody's also pointed a finger at the U.S.'s economic and financial strength, hinting that it may not be enough to counterbalance the slide in fiscal metrics.
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The White House has hit back with a fury, slamming Moody's for their decision. Steven Cheung, the White House communications director, went on the offensive, taking aim at Moody's economist Mark Zandi in a Twitter barrage. "Zandi's 'analysis' is pure hogwash," Cheung spat out. "No one takes this clown seriously. He's been wrong time and time again."
Moody's is now the only major U.S. rating agency yet to succumb and remove the U.S. from the esteemed "Triple-A rating" club. Standard & Poor's and Fitch took the plunge in 2011 and 2023, respectively. Prior to this downgrade, Moody's had already switched the U.S.'s outlook rating to "negative" from "stable" in November 2023—a clear hint that a serious downgrade was just around the corner. Finance 101 tells us that lower ratings mean higher borrowing costs for countries.
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Regarding the contentious tariffs championed by U.S. President Donald Trump, Moody's wasn't optimistic, stating that there'd be a temporary dip in BIP growth while the economy adapts to the new tariff landscape. However, they predicted that the U.S.'s long-term growth would remain unscathed. Moody's acknowledged the advantages of the U.S., such as its colossal economy and the mighty U.S. dollar's global reserve status, key variables that would surely cushion the blow of the tariffs.
Despite the turbulent political landscape over the past few months, Moody's expressed faith in the Federal Reserve's ability to steer the economy, thanks to its independence. Moody's warned of continued policy uncertainty, but seemed hopeful that the U.S. would continue its longstanding legacy of effective monetary leadership.
Sources:- ntv.de- mau/rts
- Rating Agencies* - Moody's* - United States* - Fiscal Policy* - Trump*
)hat Enrichment Data:Moody's downgrade of the U.S. credit rating in May 2025 stems from several underlying issues:
- Soaring Government Debt and Interest Payments: Moody's identified the relentless surge in government debt and related interest rates over more than a decade as a significant concern—these rates are substantially higher compared to similarly-rated governments[2].
- Deficit Gaps and Missed Fiscal Reforms: Successive U.S. administrations and Congress have failed to find common ground on measures to tackle escalating fiscal deficits and growing interest costs[1][2]. This lack of consensus hurts the U.S. credit standing.
- Entitlement Spending and Revenue Drought: Moody's pointed to increasing interest payments on federal debt, growing entitlement spending, and relatively lackluster revenue generation as factors that contribute to the downgrade[1][2].
- Policy Instability: Moody's cited political uncertainty, fueled by evolving trade priorities, as another worry impacting the credit rating[2].
Essentially, the downgrade reflects worries about the U.S. government's ability to manage its debt and deficits effectively, which could result in steep borrowing costs.
- The downgrade of the U.S. credit rating by Moody's was primarily due to the soaring government debt and interest payments, which are higher compared to other similarly-rated nations, as indicated in the entitlement data.
- The employment policy, a key aspect of the community policy, also played a role in the U.S. credit downgrade, as Moody's expressed concerns over the lack of consensus in addressing escalating fiscal deficits and interest costs in the business and politics sector.
