Moody’s Downgrades US Credit Rating as Debt Worries Grow
On May 16, 2025, Moody’s Investors Service lowered the United States’ credit rating from its highest level, Aaa, to Aa1. This means the US no longer holds a triple-A credit rating from any of the top agencies. Fitch downgraded the US in 2023, and S&P did so back in 2011, making Moody’s the latest to follow suit.
Why Did Moody’s Take This Step?
Moody’s pointed to a few main reasons for this move:
Rising Debt: The US government’s debt is expected to rise sharply, reaching about 134% of the country’s total economic output (GDP) by 2035. That’s a big increase from 98% in 2024.
Budget Deficits: For years, the US has been running big budget deficits — spending more than it earns — and no lasting plan has been put in place to fix this.
Higher Interest Costs: With interest rates going up, the government now pays more to handle its debt, which puts extra pressure on its finances.
What’s Moody’s Outlook?
Despite the downgrade, Moody’s changed its outlook from “negative” to “stable.” They believe the US still has a strong financial system, good management by the Federal Reserve, and the ability to keep things steady — even with these challenges.
What Does a Credit Score Mean, and Why Does It Matter to You?
A credit rating shows lenders how likely a country or company is to pay back the money they borrow.
A higher rating means less risk, so borrowing costs are lower. When the US loses its top rating, it can mean borrowing money becomes a bit more expensive.
How Did We Get Here
The US has borrowed a lot over the years to pay for things like healthcare, social programs, and interest on old debt. Without cutting spending or increasing income, the debt keeps growing. Experts worry this could cause problems down the road.
How Did Markets React
After the news, US Treasury yields went up and stock markets fell a bit during after-hours trading. Investors are worried about what the growing debt means for the future of the US economy.
Disclaimer
The information in this article is meant for informational purposes only. Jobaaj.com does not offer investment advice. Investors are advised to conduct their own due diligence and consult certified financial experts before making investment decisions.
