On May 20, 2025, Moody’s Investors Service downgraded the credit rating of the United States from its top-tier Aaa to Aa1. The agency cited an increasing budget deficit and heightened political polarization as primary reasons, factors that hinder the government’s ability to implement effective fiscal policy, reports the Baltimore Chronicle, citing Bloomberg.
Following the downgrade, financial markets responded with a spike in U.S. government bond yields. The yield on 10-year Treasury notes surpassed 4.5%, while 30-year bonds exceeded 5%, reflecting investor concerns about the nation’s fiscal stability.
Rising bond yields have a direct effect on consumer borrowing costs, including mortgage rates. Fixed 30-year mortgage rates rose above 7%, making home loans less accessible for many Americans.
Experts warn that the downgrade could have long-term consequences for the U.S. economy, such as increased inflation and slower economic growth. The International Monetary Fund has urged the U.S. to adopt measures aimed at reducing the budget deficit and stabilizing national debt levels.
This marks the third downgrade of the U.S. credit rating in recent years, following similar actions by Standard & Poor’s in 2011 and Fitch in 2023. The development underscores the urgent need to address fiscal imbalances and overcome political gridlock to preserve economic stability.
Earlier we wrote that european automakers cut electric vehicle production.