Moody’s Investors Service has lowered the United States government’s credit rating from its highest rating, ‘AAA’, to ‘Aa1’. This change reflects ongoing concerns about the country’s fiscal management and growing debt. The downgrade comes after repeated failures by several administrations to reduce rising budget deficits and increasing interest expenses.
The ‘AAA’ rating signals the strongest creditworthiness and shows a country’s ability to repay debts reliably. Losing this rating means Moody’s has less confidence in the US government’s long-term financial discipline. The downgrade follows warnings Moody’s issued in 2023 about the risk of losing the top credit status. Fitch Ratings also downgraded the US that year, while Standard & Poor’s made a similar move back in 2011. Moody’s had maintained the ‘AAA’ rating for over a century, since 1917.
The decision is based on more than a decade of rising government debt and growing interest costs that have outpaced those of other countries with similar credit ratings. Lower credit ratings often lead to higher borrowing costs and signal increased risk of default. Moody’s noted that despite the downgrade, the US still has major advantages, including the size of its economy and the role of the US dollar in global markets.
Moody’s projects that federal debt will rise sharply to about 134% of the country’s gross domestic product by 2035, up from 98% last year. This means government debt will grow much faster than the overall economy. The US Treasury Department has been asked to comment on the downgrade.
The downgrade also came amid political and economic challenges. A key spending plan backed by former President Donald Trump, known as the “big, beautiful bill,” failed to pass the House Budget Committee after opposition from members of both major parties. New economic data showed the US economy shrank by 0.3% in the first quarter of 2025, reversing growth of 2.4% in the previous quarter. This contraction was partly caused by reduced government spending and increased imports by businesses trying to avoid upcoming tariffs.
Moody’s downgrade highlights growing concerns about the US government’s ability to manage its debt and budget deficits. While the country retains important economic strengths, this move signals increased financial risks ahead.