On May 16, 2025, Moody’s Ratings downgraded the United States’ credit rating from Aaa to Aa1, citing rising federal debt and interest costs outpacing similarly rated sovereigns. This marks the first time the U.S. has lost its top-tier rating from all three major agencies, following S&P’s 2011 and Fitch’s 2023 downgrades. Moody’s highlighted a projected federal debt burden of 134% of GDP by 2035, up from 98% in 2024, driven by persistent fiscal deficits and the potential extension of the 2017 Tax Cuts, adding $4 trillion to deficits over a decade. Despite the downgrade, Moody’s shifted the U.S. outlook to stable from negative, acknowledging strengths like a dynamic economy, the dollar’s global reserve status, and effective monetary policy led by an independent Federal Reserve. The downgrade sparked market reactions, with Treasury yields rising and S&P 500 ETFs dipping 1% after hours. Critics, including White House officials, challenged the decision, while analysts warn of higher borrowing costs. This downgrade underscores the urgency for fiscal reform amid growing debt concerns.
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