Moody's has downgraded the US credit rating from the highest level of AAA, citing rising levels of government debt and dealing a blow to Donald Trump's rhetoric on economic strength and prosperity, AFP reported.

The downgrade from AAA to AA1 is the latest bad news for the US president, coming on the day his flagship spending bill failed to pass a key vote in Congress due to opposition from several Republican fiscal hawks.

In explaining its decision, the rating agency noted “the increase over more than a decade in the government's debt and interest payment ratios to levels that are significantly higher than those of countries with similar ratings.”

Moody's decision to downgrade the US credit rating from the highest level reflects the recent surge in US borrowing costs, which was further fueled by the Covid-19 pandemic, and is consistent with similar decisions taken in recent years by the other two major US rating agencies, S&P and Fitch.

“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and rising interest costs,” Moody's said in a statement explaining its decision.

“We do not believe that the current fiscal proposals under discussion will lead to a significant reduction in mandatory spending and deficits over the next several years,” the agency added, noting that it expects larger deficits to continue over the next decade.

“The US fiscal performance is likely to deteriorate compared to the past and compared to other highly rated countries,” Moody's said.

The agency also changed its outlook from “negative”

to “stable,” noting that despite the US's poor performance in tackling its growing public debt, the country “retains exceptional credit advantages, such as the size, resilience, and dynamism of its economy and the role of the US dollar as a global reserve currency.” |BGNES