Moody’s Corp. (MCO) has lowered its U.S. credit rating, citing concerns over increasing government debt and the high interest charged on the amount owed.
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The credit rating agency dropped its rating on the U.S. one notch, taking it down to “Aa1” from the highest “AAA” rating previously. In announcing the downgrade, Moody’s said: “This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.”
The U.S. is currently running a huge budget deficit as interest costs for Treasury debt continues to rise due to a combination of high interest rates and more debt to finance. The U.S. fiscal deficit currently totals $1.05 trillion, 13% higher than a year ago.
Last Holdout
Moody’s is the last credit rating agency to lower its rating on the U.S. The agency had kept U.S. sovereign debt at its highest rating possible even after rivals Standard & Poor’s (SPGI) and Fitch Ratings had downgraded America. Standard & Poor’s lowered the U.S. to a rating of AA+ from AAA in August 2011, and Fitch Ratings cut its U.S. rating to AA+ from AAA in August 2023.
The news came as Congress wrangles over the latest budget bill, with the Republican-led House Budget Committee rejecting a sweeping package of tax cuts over worries they will further add to the ballooning budget deficit. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” said Moody’s in its downgrade.
MCO stock has risen 3% this year.
Is MCO Stock a Buy?
The stock of Moody’s has a consensus Moderate Buy rating among 16 Wall Street analysts. That rating is based on 10 Buy, five Hold, and one Sell recommendations issued in the last three months. The average MCO price target of $503.21 implies 2.93% upside from current levels.
