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In the wake of the debt-ceiling deal signed into law by President Obama on Tuesday, the credit rating agency Moody's has confirmed the nation's AAA credit rating, and said that the deal "virtually eliminated" the risk of a default.
In the wake of the debt-ceiling deal signed into law by President Obama on Tuesday, the credit rating agency Moody's has confirmed the nation's AAA credit rating, and said that the deal "virtually eliminated" the risk of a default. But the agency also lowered its rating outlook to "negative," and said that a downgrade could still be on the horizon.
"In confirming the Aaa rating, Moody’s also recognized that today’s agreement is a first step toward achieving the long-term fiscal consolidation needed to maintain the US government debt metrics within Aaa parameters over the long run," Moody's said in a statement. "In assigning a negative outlook to the rating, Moody's indicated, however, that there would be a risk of downgrade if (1) there is a weakening in fiscal discipline in the coming year; (2) further fiscal consolidation measures are not adopted in 2013; (3) the economic outlook deteriorates significantly; or (4) there is an appreciable rise in the US government's funding costs over and above what is currently expected."
Moody's statement also said it "expects to see a stabilization of the federal government's debt-to-GDP ratio not too far above its projected 2012 level of 73% by the middle of the decade, followed by a decline."
All three major rating agencies had warned of a downgrade before the debt-ceiling deal. Moody's is the first to come out and preserve the country's AAA status. MSNBC reports that Fitch plans to complete its review of the rating by the end of August, and has not ruled out a downgrade.
"While the agreement is clearly a step in the right direction, the United States, as in much of Europe, must also confront tough choices on tax and spending against a weak economic back drop if the budget deficit and government debt is to be cut to safer levels over the medium term," Fitch said in a statement obtained by MSNBC.
Standard & Poor's, the third major agency, has not yet commented. According to MSNBC, the agency "has warned that the nation's credit rating would be subject to a downgrade without a credible deficit-reduction package worth $4 trillion over 10 years. The package agreed to by congressional negotiators falls well short of that mark."
CNN reports that Moody's first assigned the U.S. a AAA rating in 1917.