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Et Tu, Moody's? Rating Agency Warns of U.S. Credit Downgrade
Posted: September 12, 2012
Thirteen months after rival rating agency Standard & Poor's stripped the U.S. of its top credit rati...
Thirteen months after rival rating agency Standard & Poor's stripped the U.S. of its top credit rating amid partisan debt-ceiling gridlock in Washington, Moody's Investors Service says it too may cut its rating if the U.S. can't get a handle on its budget and debt-to-GDP ratio. From Moody's this morning:
"Budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the US government's Aaa rating and negative outlook.... If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable. If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1."
Moody's timing certainly seems curious and conspicuous, given that its report on the U.S., which hinges on negotiations that will take place in 2013, comes out the morning of the 11th anniversary of the Sept. 11th attacks, in the midst of a heated presidential campaign less than two months before the November election, and during a week in which the Fed is widely expected to announce further quantitative easing measures, likely via further bond purchases.
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