Moody’s Affirms US Aaa Rating; maintains a stable outlook
Moody’s Investors Service (“Moody’s”) today affirmed the Aaa long-term and senior unsecured issuer ratings from the United States of America (US) government. The outlook remains stable.
The rating affirmation is driven by Moody’s view that the United States is emerging from the pandemic shock with its credit strengths intact, underpinned by exceptional economic strength, elevated institutional and governance strength, and the unique roles and central US dollar and US treasury bill market. in the global financial system, which, among other advantages, offers an extraordinary financing capacity. The strong US policy response to the pandemic supported a very quick and early recovery that avoided economic scarring and demonstrated the government’s ability to manage shocks. Moody’s expects the U.S. economy and sovereign credit profile to remain resilient to shocks, including current challenges to the global economy from persistently high inflation, tighter financial conditions and the invasion Russian from Ukraine. Risks to the US economy have increased significantly and could lead to a sharper-than-expected slowdown or even a recession due to further monetary policy tightening in the coming quarters. If they materialize, these risks would put additional pressure on the relatively fragile US fiscal position. However, according to Moody’s, US institutions, including the Federal Reserve, will be able to effectively manage these challenges and the US economy will demonstrate its resilience.
The stable outlook reflects Moody’s view that the diversity, vibrancy and competitiveness of the U.S. economy, together with the status of the U.S. dollar as the preeminent international reserve currency and the very significant size and depth of the market from the US Treasury, will continue to offset growing fiscal pressures. and periods of economic downturn. Following sharply widening fiscal deficits and rising debt burdens during the pandemic, deficit and debt ratios will improve in 2022 and 2023. However, U.S. fiscal strength is expected to deteriorate to an increasing rate over time as entitlement expenditures and interest payments result in persistent budget deficits, lack of material revenue or entitlement reforms. Diminishing confidence that U.S. policymakers will take effective action in coming years to reduce federal government budget deficits and the continued increase in the debt burden would signal an erosion of fiscal and institutional soundness, which would weigh on the sovereign’s credit profile.
US long-term caps in local and foreign currencies remain unchanged at Aaa. The Aaa local currency ceiling reflects a small government footprint in the economy, predictable and efficient institutions, very low external imbalances and low political risks, which reduce all risks posed to non-governmental issuers by actions or shocks. that would generally affect government and the private sector. The foreign exchange cap at Aaa reflects the country’s very strong political efficiency and open capital account which reduce transfer and convertibility risks to minimal levels. Its short-term foreign currency caps remain unchanged at Prime-1.