Copyright © HT Digital Streams Limit all rights reserved. A lower sovereign rating means that the US government may have to pay more for its loans. (Reuters) Summary Moody’s downgraded the US credit rating of ‘AA1’ due to rising debt and political disagreement. The US debt is over $ 35 billion, with a projected deficit increase. This downgrade can increase borrowing costs, affecting the economy and Wall Street, although the US economy remains resilient. For the first time in history, the US does not have a top credit rating of any of the three most important rating agencies. Mint looks at the latest development and what it means for the world’s largest economy as well as for global markets. What has become of the US credit rating? The rating agency Moody’s downgraded the US ‘sovereign credit rating by one notch’ to ‘AA1’ on Friday, referring to the growing debt of the country amid persistent political. Moody’s has maintained a top rating of ‘AAA’ since 1919. The agency assigned the country a ‘negative’ prospects in 2023. The peer group, Fitch ratings, downgraded the US by one notch to ‘AA+’ from ‘AAA’ in August 2023 due to fiscal decline and repeated gridlocks during debt negotiations in the US Congress. S&P Global Ratings was the first agency to lower the US Triple-A rating in 2011. What did the latest downgrade urge? The biggest problem is the US Humongous debt pile, which in 2024 was over $ 35 billion. This compares with the country’s GDP of about $ 29 trillion. “More than a decade, US federal debt has risen sharply due to continuous fiscal deficits. During that time, federal spending increased while tax cuts reduced government revenue,” Moody’s said. It expects the federal deficit to increase to almost 9% of GDP by 2035, higher than 6.4% in 2024. It has also been noted that successive US administrations have failed to vote on measures to stop the tendency of major annual fiscal shortages and growing interest costs. Read also | Mint Primer: Will the Strata crisis hit small and medium Reit’s? What does this mean for the US? A lower sovereign rating means that the US government may have to pay more for its loans, which will have an intoxicating impact on the broader economy, including higher mortgage rates and consumer loan costs. Many institutional investors who usually only buy AAA rated securities may look at the download of US treasury, which will also lead to an increase in returns and consequently raise interest rates for both businesses and consumers. What will be the impact on Wall Street? Analysts say although US stocks may have a reaction to the knee, the downgrade in itself is probably not a cause of widespread concern, as Washington’s debt addiction is hardly a secret. Everyone was stunned by the first downgrade by S&P in 2011, but even then the market rally was resumed after a few weeks. Read it | Mint Primer | India’s economy looks strong. What can go wrong? Not to forget, despite multiple challenges, the US economy remains resilient as always. Even Moody’s have acknowledged that the US retains extraordinary credit strength such as the size and dynamics of its economy, the role of US dollar as global reserve currency and its long history of effective monetary policy led by an independent federal reserve. Will it have an impact on the Indian markets? Dalal Street has recently stabilized after a long -standing sales by foreign institutional investors (FIIs), so any sudden turnaround in the global investor sentiment will be detrimental to emerging markets such as India. Any resumption in the sale by foreign investors will renew the stock market as well as Rupee. However, it does not look at the moment. The larger wind for the domestic market remains US President Donald Trump’s tariff threats, and participants are awaiting a quick resolution on the same. In addition, at this time, gold can see another round of secure purchase, which will extend its record run. And read | Mint Primer: What it Companies’ Q4 show means to investors, all the business news, market news, news reports and latest news updates on live mint. Download the Mint News app to get daily market updates. More Topics #Primer Mint Specials
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