Moody’s Investors Service has downgraded the United States’ sovereign credit rating one notch from Aaa to Aa1, citing growing concerns over the country’s fiscal outlook, including surging debt levels and rising interest obligations. The move, announced Friday, marks the last of the major credit agencies to cut the U.S. from its highest rating, following similar downgrades by Standard & Poor’s in 2011 and Fitch Ratings in 2023.
The downgrade underscores mounting macroeconomic pressures, with Moody’s projecting federal debt to balloon to 134 percent of GDP by 2035—up sharply from 98 percent in 2023. The U.S. budget deficit is expected to widen to nearly 9 percent of GDP by 2035, driven by increasing entitlement spending, interest payments on the debt, and declining tax revenues.
Despite the downgrade, Moody’s revised its outlook for the U.S. to “stable” from “negative,” signaling confidence in the government’s near-term credit stability. However, the decision could have significant global implications, as U.S. Treasury securities are a foundational asset class for sovereign wealth funds, pension funds, and institutional investors. Any perceived increase in risk could translate into higher borrowing costs for the U.S. and heightened volatility in global financial markets.
With the U.S. now rated below AAA by three of the four major credit rating agencies—Moody’s (Aa1), S&P (AA+), and Fitch (AA+)—only DBRS maintains a top-tier AAA rating with a stable outlook.
