US Debt Crisis: Moody’s Forecasts US Downgrade by 2013

ForexNewsNow | Published on August 8, 2011 at 6:11 am

Credit rating agency Moody’s Corporation reiterated on Monday that it may also decide to lower the US Debt Rating before 2013, unless the country takes significant steps to reign in it’s spending and increase it’s fiscal discipline.

In order to maintain the “AAA” rating the US has held for the past 70 years, the rating agency stated that the ratio of debt to GDP of the United States should not exceed 75% by 2015 and should decline thereafter.

According to Moody’s, reaching a political agreement on further reductions in spending by early 2013 appears “difficult but not impossible.”

On Friday, Standard & Poor’s downgraded the US Debt Rating from “AAA” to “AA +”, in an unprecedented move for the United States, which some interpret as a signal of the decline of the US economy’s unrivaled global hegemony over the past 2 decades.

Yet while Standard & Poor’s appeared unsatisfied with the outcome of the budget agreement passed on August 2, Moody’s seems prepared to give the US more time to solve its debt crisis before downgrading Washington’s rating.

The two credit rating agencies both agree that the ongoing debt crisis could signal a significant deterioration in the US economy, yet the agencies differ in their outlook on the ability of the U.S. Congress to agree on additional cuts in the coming year.

 

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