Moody's warns U.S. credit rating could be cut
Tuesday, September 11, 2012 12:11 PM
Moody's Investors Services warned that the United States could lose its top credit rating if lawmakers can't come to an agreement on how to reduce the percentage of debt to gross domestic product during budget negotiations next year, Bloomberg reported.
Moody's placed a negative outlook on the U.S.'s AAA grade in August. The credit-rating agency said in a statement today that the rating would likely be cut to AA1 if negotiations are unable to produce such policies.
Plans that produce a stabilization and then downward trend in the ratio will likely keep its current rating.
The country's course toward a "fiscal cliff," a combination of expiring tax cuts and more than $1 trillion of automatic spending reductions set to take effect in January, is at the center of Moody's warning.
"The maintenance of the AAA with a negative outlook into 2014" is unlikely, Moody's said today in the statement. That outlook would only be extended if a "fiscal cliff actually materialized-which could lead to instability. Moody's would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook."
Standard & Poor's downgraded the United States on Aug. 5, 2011, and has said political and fiscal risks may lead to another downgrade. Meanwhile, Fitch Ratings has kept the country's AAA rating with a negative outlook.