Ratings agency Moody’s decided to lower its outlook on the U.S. credit rating from “stable” to “negative” as federal spending contributes to a larger fiscal deficit. A rise in government spending rocked investors’ confidence, leading to a government bond selloff that took their prices to their lowest level in 16 years.
“It is hard to disagree with the rationale, with no reasonable expectation for fiscal consolidation any time soon,” Christopher Hodge, chief economist for the U.S. at Natixis, said of Moody’s decision. Hodge added that as interest rates continue to rise, they will pile up the government’s debt.
Moody’s is the last of the three major rating agencies to downgrade its credit rating for the U.S. government. Fitch lowered its rating from triple-A to AA+ in August, while S&P’s AA+ rating has stood since 2011.