Moody’s Investors Service, the only major credit agency to assign the US a top rating, has said that a short-lived shutdown underscore the weakness of US institutional and governance strength, the Bloomberg reported.
“While government debt service payments would not be impacted and a short-lived shutdown would be unlikely to disrupt the economy, it would underscore the weakness of US institutional and governance strength relative to other Aaa-rated sovereigns that we have highlighted in recent years,” Bloomberg quoted William Foster report.
In the wake of the Federal debt ceiling “brinkmanship” earlier this year, “a government shutdown would demonstrate the significant constraints that intensifying political polarization continue to put on US fiscal policymaking during a period of declining fiscal strength, driven by persistent fiscal deficits and deteriorating debt affordability,” Moody’s added.
Markets have been on watch for further credit actions after Fitch Ratings downgraded the US earlier this year, citing concerns about political wrangling over the debt ceiling that took the nation to the brink of a default, the report said.
Moody’s latest report — which leaves its rating of the US unchanged — is a sign that US debt sustainability and the politics around it will continue to be a theme through the remainder of the year.
The report comes as Congress struggles to pass a short-term spending bill required to stop a government shutdown when the new US fiscal year begins in October.
Some of the holdouts have cited Fitch’s downgrade, and the company’s concerns about the size of US debt, while overlooking its criticism of the brinkmanship associated with the debt ceiling.
Moody’s said a shutdown’s effect “would be concentrated in areas with a large government presence and depend on the duration of the closure.”
Treasury yields rose again to near their highest levels in more than a decade. Stocks have struggled recently as the realization sinks in that the Federal Reserve will likely keep interest rates high well into next year. The Fed wants to ensure inflation gets back down to its target.
“Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!
Download The Mint News App to get Daily Market Updates.
Updated: 26 Sep 2023, 01:48 AM IST