Historic Downgrade Hits U.S. Creditworthiness
U.S. credit rating downgrade: Moody’s Ratings reduced the nation’s score from Aaa to Aa1 on May 16, 2025. The action signifies a significant change in the public’s perception of America’s debt management capabilities.
This decision follows years of increasing federal debt and growing interest costs. Moody’s says the downgrade reflects a decade-long trend that has worsened under current fiscal conditions.
Why Moody’s Cut the Rating
Moody’s cited high debt levels and expensive interest payments as major concerns. The downgrade lowers U.S. credit standing on Moody’s 21-point scale by one notch.
According to the agency, the U.S. now holds debt and interest ratios significantly above countries with similar ratings.
Implications for the Economy
The downgrading may make borrowing more expensive for the US Treasury. In order to buy U.S. stocks, investors may now demand greater yields . This could also weaken investor confidence in U.S. assets like stocks and bonds.
Already, the 10-year Treasury yield rose to 4.48%, and bond ETFs saw losses in after-hours trading. Stocks also slipped slightly in response.
U.S. Falls in Line with Global Peers
Moody’s had been the last top agency holding the U.S. at Aaa. Its downgrade now aligns it with Standard & Poor’s and Fitch, both of which had already dropped the U.S. to AA+.
Moody’s had maintained a top rating since it officially began assessing U.S. debt in 1993.
Congressional Gridlock Blamed
Moody’s cited “failure to address rising fiscal deficits” as a major reason for the cut. The agency does not expect current proposals to reduce spending in a meaningful, long-term way.
Attempts to address the debt have stalled in Congress. A recent GOP-led committee even rejected a proposed tax cut extension from President Donald Trump’s administration.
Deficit Numbers Continue to Climb
The U.S. deficit reached $1.05 trillion for the fiscal year starting October 1, 2024 — up 13% from the year before.
Though tariffs brought in more money last month, it was not enough to curb the widening gap between spending and revenue.
Source: NBC News
