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Moody’s no longer has a gold-standard ‘AAA’ sovereign credit rating for the United States. On Friday, Moody’s—one of the three main credit rating agencies—cut the US sovereign credit rating by a notch to ‘AA1’ from ‘AAA’ citing the growing American debt pile. Moody’s becomes the last of the big three rating firms to downgrade the federal US debt, following similar moves by Fitch in 2023 and S&P in 2011.

What does the rating action mean? Moody’s has lowered what are known as the sovereign long-term issuer and senior unsecured ratings for the US. Simply put, it implies the agency’s reduced confidence in America’s creditworthiness amid an apparent rising debt-to-GDP ratio—meaning a country’s debt is rising at a faster rate than its economic output.

According to Moody’s, follow-up moves to the Trump 1.0 administration’s tax cuts may add $4 trillion to the primary US federal deficit over the next decade. Tax cuts have been a main priority of the Republican-controlled Congress in the US.

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