INVC NEWS
New York – The Moody’s Investors Service has downgraded the United States’ long-standing AAA credit rating to AA1, signaling growing concern over America’s mounting debt and fiscal outlook. This marks the first time since 1917 that Moody’s has revoked America’s perfect credit rating, aligning with Fitch and S&P, which previously made similar downgrades in 2023 and 2011, respectively.
According to Moody’s, the key reason for the downgrade lies in the ballooning debt-to-GDP ratio and the rising cost of interest payments, which now significantly outpace other highly rated nations. The agency warns that this trajectory of borrowing is likely to accelerate, adding long-term strain on the US economy.
Moody’s Maintains ‘Stable Outlook’ — But With a Caution
While the downgrade is a blow to global investor confidence, Moody’s retained a stable outlook, citing the Federal Reserve’s policy strength and independence as critical safeguards. However, this too faces challenges: Former President Donald Trump has repeatedly questioned the Fed’s autonomy, even threatening to oust Chairman Jerome Powell — a move that could erode institutional stability.
The downgrade has become a flashpoint in US political debates. The White House, through spokesperson Kush Desai, accused the Biden administration of irresponsible economic management. Meanwhile, Republicans and the Trump-led Department of Government Efficiency (DOGE) have doubled down on cost-cutting measures, reducing workforce and foreign aid expenditures in a bid to curb deficits.
What This Means for Americans
The shift in credit rating may trigger an increase in Treasury yields, which could in turn raise interest rates on mortgages, auto loans, and credit cards. Consumers already burdened by inflation and high tariffs may feel the pressure of higher borrowing costs in the near term.
Although Trump’s administration pushes for spending reductions, analysts caution that proposed bills — like permanent 2017 tax cuts and Medicaid reforms — may balloon the deficit by $3.3 trillion over the next decade.
This historic downgrade is a reminder that even global economic powerhouses are vulnerable to unchecked debt, political uncertainty, and shifting monetary policies — a reality investors and consumers alike can no longer ignore.
