Moody’s Lowers Rating

The US lost its last perfect credit rating Friday, with Moody’s downgrading US debt one notch, from an Aaa rating to Aa1. The decision—over the rising US deficit, increased interest payment ratios, and sluggish growth—ends the country’s perfect Moody’s credit rating, in place since 1917. 

Moody’s said it expects federal debt to jump from 98% of the US gross domestic product last year to 134% by 2035 (see overview), with the deficit expected to jump to nearly 9% of GDP. The company said the decade-plus-long increase in the deficit and interest payment ratios exceeds metrics from similar countries. The decision signals increased risk for US bond investors and could drive higher borrowing costs as investors may require a higher yield to buy US Treasury debt.

Moody’s is the last major credit rating agency to have granted the US a perfect rating after Fitch downgraded the US in 2023 and S&P Global did so in 2011. Explore the US deficit here.