May 19, 2025 ☼ Zettelkasten ☼ Automated Post
Screenshot of Moody’s downgrade of US intensifies investor worry about debt time-bomb
U.S. sovereign downgrade by Moody’s has prompted concern among investors about the escalating American debt that currently stands at $36 trillion. While President Trump is pushing for his broad tax-cut bill that secured approval from a key Congressional committee, the Moody’s rating cut has made investors more cautious about the fiscal policy that is presently under negotiation. Experts believe this downgrade, following similar actions by Fitch and Standard & Poor’s in previous years, will eventually lead to an increase in borrowing costs for the U.S public and private sectors. Moody’s has expressed skepticism if material reductions in deficit can occur, given successive administrations have been unsuccessful in reversing the trend of growing fiscal deficits and interest costs.
The U.S. government hit its statutory borrowing limit in January and had to resort to “extraordinary measures” to prevent crossing the cap. This has raised investor anxiety relating to the debt limit. The fiscal package, if politically viable, is expected to cause wider deficits in the short term and unlikely to deliver a significant boost to the economy. Critics have warned that without a meaningful overhaul of spending levels, a substantial improvement in U.S. fiscal path seems improbable. While Moody’s rating cut doesn’t seem likely to result in forced selling from investors, some market strategists predict that it might lead to greater focus on the fiscal policy and the proposed tax bill.
#MoodyRatingDowngrade #USDollarDowngraded #USDebtCrisis #USFiscalPolicy #TaxCutBillDebate