Moody's says US fiscal strength on course for continued decline

Ratings agency Moody's said on Tuesday that the US' fiscal strength is on track for a continued multi-year decline as budget deficits widen and debt becomes less affordable, Report informs via Reuters.

The agency said that the country's fiscal health deteriorated further since Moody's lowered its outlook on the US triple-A rating in November 2023.

The news comes amid heightened uncertainty in US financial markets as President Donald Trump's decision to impose punitive tariffs on key trading partners has sparked investor fears of higher price pressures and a sharp economic slowdown.

"Even in a very positive and low probability economic and financial scenario, debt affordability remains materially weaker than for other Aaa-rated and highly rated sovereigns," Moody's said.

It projects debt to gross domestic product, a key ratio in assessing a country's finances, will rise to around 130% by 2035 from nearly 100% in 2025. Debt affordability will worsen at a faster rate, with interest payments accounting for 30% of revenue by 2035 from 9% in 2021, it said.

Moody's is the last among major ratings agencies to keep a top, triple-A rating for US sovereign debt, though it lowered its outlook in late 2023 due to wider fiscal deficits and higher interest debt payments.