Moody's Investors Service has lowered the outlook of its rating on the United States' Government to negative, from stable. This is due to increasing risks for the fiscal strength of the country.
The agency has confirmed the Aaa rating for the U.S. long-term issuers and senior unsecured debt.
Moody's decision to reduce its outlook comes as Congress is once again facing the threat of another government shutdown. The government will be funded until next Friday.
The newly elected House Speaker Mike Johnson has said that he will release a Republican funding plan for the government on Saturday.
Moody's Investors Service downgraded its rating outlook for the United States' Government on Friday from stable to negative, citing rising risks to fiscal strength.
The agency affirmed that the U.S. long-term issuer rating and senior unsecured rating are Aaa.
The agency stated that "in the context of increased interest rates, there are no effective fiscal policies to reduce government expenditures or increase revenue." "Moody's believes that the US's fiscal deficits will continue to be very large and this will significantly affect debt affordability."
Moody's also cited the role of Washington's bluff tactics.
The ratings agency stated that "continued political polarization in the US Congress increases the risk of successive governments not being able to come to a consensus on a plan fiscal to slow down the decline in debt affordability."
Moody's expects that the U.S. will "retain their exceptional economic strength" in order to keep the nation's rating at Aaa. The agency stated that "further positive surprises in growth over the medium-term could at least delay the deterioration of debt affordability."
In a press release, Deputy Secretary Wally Adeyemo said that while Moody's maintained the United States' rating of Aaa, he disagreed with the change to a more negative outlook. "The American economy is strong and Treasury Securities are the most liquid and safe asset in the world."
Moody's decision to reduce its outlook comes as Congress is once again facing the threat of another government shutdown. The government is currently funded until Nov. 17 but Washington lawmakers are still at odds over a bill before the deadline.
Mike Johnson, the newly elected House Speaker (R-La. ), has announced that he will release a Republican government funding plan on Saturday. This would give members time to read it before an expected vote on Tuesday. Mike Johnson (R-La.) has said that he plans to release the Republican Government Funding Plan on Saturday. This will give members enough time to review it before a vote expected on Tuesday.
But his plan to fund certain parts of the government through Dec. 7, and other parts through Jan. 19, known as a laddered continuing resolution, or CR, is dead on arrival in the White House and in the Democratic-controlled Senate.
Karine Jean Pierre, White House Press Secretary, said that "Moody’s decision to alter the U.S. perspective is another consequence of Congressional Republican extremeism and dysfunction."
Fitch cut U.S. long term foreign currency issuer default ratings to AA+, from AAA. They cited "expected fiscal decline over the next 3 years," an erosion of governance, and a growing burden on debt.
Washington's feuding was another issue. Fitch stated at the time that "the repeated debt-limit standoffs, and last-minute solutions have eroded trust in fiscal management".
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Christina Wilkie, CNBC's reporter, contributed to this report.