Moody’s lowered the US credit score to Aa1 from Aaa on Friday, joining Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position. The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative. The credit assessor now has a stable outlook.
“Being asked why Moody’s would downgrade the US now,” said Andrew Brenner at NatAlliance Securities. “Moody’s is trying to send a message to Congress to get their act together.”
A key House committee on Friday failed to advance House Republicans’ massive tax-and-spending bill after hard-line conservatives bucked Donald Trump and blocked the bill over cost concerns. Negotiations will continue through the weekend, with the committee planning to meet again late Sunday night.
Long-term Treasury yields have already been moving higher, with 30-year rates creeping toward 5% as the tax-cut plan adds to investor concerns about the surging debt load. The US deficit has been in excess of 6% of gross domestic product for the past two years, an unusually high burden outside of economic recessions or world wars.
Jamie Dimon, chief executive officer of JPMorgan Chase & Co., said in a Bloomberg Television interview this week that the US deficit and debt load would be an issue.
“It creates risk of inflation to me. It creates risk of higher long-term rates,” Dimon said at JPMorgan’s annual Global Markets Conference in Paris. That might slow growth and create a stagflation scenario, he added.
