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13 July 2011

Moody’s downgrade warning pressures US on debt deal


Moody's Investors Service raised the pressure on U.S lawmakers to increase the government's $14.3 trillion debt limit by placing the nation's credit rating under review for a downgrade.

The US, rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt threshold won’t be raised in time to prevent a missed interest or principal payment on outstanding bonds and notes, even though the risk remains low, Moody’s said in a statement yesterday. The rating may be reduced to the Aa range, and there is no assurance Moody’s would restore its top rating, even if a default is quickly “cured”.

President Barack Obama is considering summoning congressional leaders to Camp David this weekend to work on a plan to raise the debt ceiling after yesterday’s negotiations on a deficit-cutting plan of at least $2 trillion stalled, according to two people familiar with the matter. A default resulting from a failure to raise the debt limit may lead to slower economic growth and another financial crisis.

Press release


© Bloomberg


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