Moody’s Predicts Stable U.S. Debt Rating

For the first two weeks of this month, the U.S. federal government was mostly shut down as a result of a standoff between Republican and Democrat lawmakers in Congress. Republicans refused to raise the country’s debt ceiling unless President Obama’s signature health care reform law, the Affordable Care Act, was defunded.

A congressional standoff resulted in a temporary shutdown
of the U.S. federal government.
mdgn / Shutterstock.com

During that standoff, Moody’s predicted that the country would not default on its debt despite the nearing deadline. Moody’s Raymond McDaniel, the ratings agency’s CEO, said he had faith in the U.S. Treasury’s ability to keep the U.S. afloat.

“It is extremely unlikely that the Treasury is not going to continue to pay on those securities,” he said in a CNBC interview. “Hopefully it is unlikely that we go past October 17 and fail to raise the debt ceiling, but even if that does happen, then we think that the U.S. Treasury is still going to pay on those Treasury securities.”

Luckily, lawmakers managed to make a deal before the deadline passed (though they waited until the last minute to do so).

Republicans and Democrats struck a bipartisan deal that will fund the government halfway through January, with another debt limit deadline hitting on February 7^th. The deal marks a small amount of progress, but there is still much to be done before the new deadline.

There’s nothing stopping another standoff like this month’s from occurring again in January and February, but Moody’s says that even if that happens, they’ll likely take the same stance as this time around.

Steven Hess, who is the lead U.S. sovereign credit analyst at Moody’s, said that the U.S. debt rating is stable and that what happens in February is unlikely to affect that. However, he did caution that things could change in the coming months, as lawmakers begin negotiating a longer-term plan.