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Tuesday, 11 September 2012
U.S. Rating May Be Cut by Moody’s If Debt-to-GDP Not Reduced
By John Detrixhe - Sep 11, 2012 5:41 PM GMT+0400
Tom Williams/CQ Roll Call/Getty Images
Rep. Steve LaTourette, a Republican from Ohio, speaks at a news conference at the House Triangle to call on Congress to work together to address a possible financial crisis in the future dubbed the "fiscal cliff." Reps. Robert Dold, right, and Dan Lipinski also appear.
The U.S. may lose its top credit rating from Moody’s Investors Service unless lawmakers are able to reduce the percentage of debt to gross domestic product during budget negotiations next year.
Sept. 11 (Bloomberg) -- Peter Hayes, head of municipal bonds at BlackRock Inc., talks about the potential impact of the U.S. fiscal situation on the nation's credit rating and bond market. Hayes, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses the teachers' strike in Chicago. (Source: Bloomberg)
The U.S. is on course for a so-called fiscal cliff in which tax cuts enacted under President George W. Bush to expire at the end of this year and for more than $1 trillion of automatic spending reductions to take effect in January. Photographer: Joshua Roberts/Bloomberg
Moody’s, which placed a negative outlook on the U.S.’s Aaa grade in August, said in a statement today that the rating would likely be cut to Aa1 if negotiations fail to produce such policies. Plans that produce a stabilization and then downward trend in the ratio over the medium term will likely lead to an affirmation of the rating.
The U.S. is on course for a so-called fiscal cliff in which tax cuts enacted under President George W. Bush to expire at the end of this year and for more than $1 trillion of automatic spending reductions to take effect in January.
“The maintenance of the Aaa with a negative outlook into 2014” is unlikely, Moody’s said today in the statement. That outlook would only be extended if a “ ‘fiscal cliff’ actually materialized—which could lead to instability. Moody’s would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook.”
Standard & Poor’s downgraded the U.S. on Aug. 5, 2011, and has said political and fiscal risks may lead to another downgrade. Fitch Ratings rate America at AAA with a negative outlook.