Moody's: U.S. Credit Rating at Risk
Reuters reports:
Moody's Investors Service warned on Thursday that lack of U.S. government action on the budget deficit increases the likelihood of a negative outlook on the country's top AAA credit rating.
The Moody's report, which came hours after a downgrade of Japan by Standard & Poor's and an IMF warning on growing budget deficits in both countries, reiterated previous comments made by the agency late last year.
Moody's had said in December that the extension of Bush-era tax cuts would add to the likelihood of a negative outlook on the U.S. rating in the next two years.
Lower debt ratings typically push up a country's borrowing costs. A negative outlook makes a rating downgrade more likely in the next 12 to 18 months.
In Thursday's report, Moody's provided more details about the risks to U.S. ratings. It expressed concern about the new configuration of the U.S. Congress, saying it may reduce the chances of an agreement to rein in the deficit.
The Republicans won majority control of the U.S. House of Representatives in the November elections, but the Democrats continue to hold the majority in the Senate.
Moody's also worried that Congress may fail to consider and pass into law some of the deficit-reducing measures proposed by the National Commission on Fiscal Responsibility and Reform, a panel mandated by President Barack Obama to find ways to tackle the deficit.
"Recent trends in and the outlook for government financial metrics in particular indicate that the level of risk (to the U.S. rating), while still small, is rising and likely to continue to rise in the next several years," Moody's said in the report.
"Although no rating action is contemplated at this time, the time frame for possible future actions appears to be shortening, and the probability of assigning a negative outlook in the coming two years is rising," it added.
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