The United States has suffered a major financial blow after Moody’s Ratings stripped the country of its last remaining AAA credit rating — a move that could shake global markets and lead to a surge in interest rates.
The downgrade marks the end of an era – as Moody’s had upheld America’s spotless credit standing since 1917 – but on Friday reports CNN, the agency dropped the US down one notch to Aa1, bringing it in line with rivals Fitch Ratings and S&P, which previously slashed their ratings in 2023 and 2011.
In a blunt statement, Moody’s pointed to “the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns” as a key reason for the downgrade.
The agency warned that America’s borrowing needs are only expected to rise — something that could drag on the entire economy.
Despite the dramatic downgrade, the White House and Treasury Department remained tight-lipped, declining to comment immediately.
Moody’s insisted that the US isn’t in danger of another downgrade anytime soon: “Its long history of very effective monetary policy led by an independent Federal Reserve” has helped keep the credit outlook “stable.”
But there’s a political cloud looming.
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President Donald Trump has recently cast doubt on whether he would preserve the Fed’s independence, having previously threatened to sack Chair Jerome Powell.
Still, Aa1 is nothing to sneer at.
Moody’s acknowledged that America’s political foundations — though under stress — remain intact:
“The stable outlook also takes into account institutional features, including the constitutional separation of powers among the three branches of government that contributes to policy effectiveness over time and is relatively insensitive to events over a short period.
“While these institutional arrangements can be tested at times, we expect them to remain strong and resilient,” the agency said.
The path to regaining AAA status is clear, according to Moody’s: increase revenue or slash spending.
Trump’s administration has already taken an axe to federal departments, with Elon Musk’s Department of Government Efficiency leading to thousands of layoffs and the gutting of the US Agency for International Development (USAID).
But despite these sweeping cuts, it’s still unclear whether they’re having any impact on America’s growing debt problem. Alarm bells are ringing again as the country creeps closer to a possible summer default, unless Congress raises the borrowing cap — something the Treasury Department has repeatedly warned about.
Moody’s had sounded the alarm last November, placing the US on downgrade watch amid signs of deepening political chaos.
That included last summer’s near-default crisis, the historic ousting of House Speaker Kevin McCarthy, and a gridlocked Congress unable to agree on a successor for weeks.