Moody's lowers US' outlook to negative, affirms Aaa ratings

By Ovunc Kutlu

ISTANBUL (AA) - Moody's announced Friday that it lowered the US' outlook to negative, from stable, but affirmed its long-term issuer and senior unsecured ratings at Aaa.

"The key driver of the outlook change to negative is Moody's assessment that the downside risks to the US' fiscal strength have increased and may no longer be fully offset by the sovereign's unique credit strengths," it said in a statement.

"In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody's expects that the US' fiscal deficits will remain very large, significantly weakening debt affordability," it added.

The global rating agency said it expects the US to retain its "exceptional" economic strength.

"While the adjustment of the US economy and financial sector to higher-for-longer interest rates is underway, policymakers have facilitated the transition through transparent and effective policy," it said.

The agency noted "the unique and central roles" of the US dollar and Treasury bond market in the global financial system provide extraordinary funding capacity and significantly reduce the risk of a sudden spiraling of funding costs, which is particularly relevant in the context of high debt levels and weakening debt affordability.