Moody’s, a major credit agency, has issued a warning stating that the ongoing US government shutdown will have a negative impact on the country’s credit. This comes just a month after credit rating agency Fitch downgraded the United States due to a debt ceiling crisis. Moody’s warns that the shutdown highlights the limitations resulting from political polarization, hindering fiscal policymaking and exacerbating the nation’s declining fiscal strength caused by increasing fiscal deficits and worsening debt affordability. The longer the shutdown continues, the more detrimental the effects are predicted to be.
It is important to note that Fitch had already downgraded the US in August, mentioning the debt limit dispute as one of the reasons for the downgrade. It is worth highlighting that Moody’s is currently the only major credit rating firm that provides the US with a top credit rating. Despite the significant warning from Moody’s, there has not been a noticeable reaction in the market, with the US Dollar Index (DXY) remaining unchanged at 105.95 at the time of writing.
In summary, Moody’s has issued a severe warning that the US government shutdown will have a negative impact on the country’s credit. The organization emphasizes the limitations posed by political polarization and outlines the worsening fiscal strength caused by increasing fiscal deficits and deteriorating debt affordability. Although Fitch had already downgraded the US due to the debt ceiling crisis, Moody’s currently maintains a top credit rating for the nation. Despite the warning, the market has not yet shown any significant reaction.
