The United States has lost its last perfect credit rating after Moody’s Investors Service downgraded the country’s long-standing ‘AAA’ rating to ‘Aa1’, citing mounting debt and persistent fiscal challenges. The move marks the first time since 1917 that Moody’s has not assigned its highest rating to U.S. government debt.
In its announcement, Moody’s highlighted concerns over the federal government’s growing deficits and ballooning interest costs, noting a lack of effective action across multiple administrations to reverse the trend. “The downgrade reflects the increase over more than a decade in government debt and interest payment ratios to levels significantly higher than similarly rated sovereigns,” the agency stated.
The U.S. had been the last major economy to hold a top-tier rating from one of the “big three” credit rating agencies. Fitch Ratings downgraded the U.S. in 2023, and S&P Global Ratings made a similar move back in 2011 following a standoff over the federal debt ceiling.
A lower credit rating signals increased risk for investors and could lead to higher borrowing costs for the U.S. government. While Moody’s acknowledged the U.S. retains key strengths — including the size and resilience of its economy, and the global dominance of the U.S. dollar — it warned that federal debt is projected to climb to around 134% of GDP by 2035, up from 98% last year.
The downgrade comes at a politically tense moment in Washington. On the same day, President Donald Trump’s high-profile spending proposal, dubbed the “big, beautiful bill,” stalled in the House Budget Committee, with several Republicans joining Democrats in opposition. The legislative defeat adds to the administration’s struggles in managing a slowing economy.
Economic data released Friday showed that U.S. GDP contracted at an annual rate of 0.3% in the first quarter of the year. The Commerce Department cited declining government spending and a surge in imports, driven in part by businesses rushing to beat new tariffs, as key contributors to the slowdown. The decline follows 2.4% growth in the previous quarter.
In response to the downgrade, the White House criticized Moody’s, with spokesman Kush Desai stating: “If Moody’s had any credibility, they would not have stayed silent as the fiscal disaster of the past four years unfolded.” The administration maintains that it is focused on correcting what it calls the “mess” left by previous economic policies.
The U.S. Department of Treasury has yet to comment publicly on the credit rating downgrade.
