Moody’s Updates Outlook for U.S. Debt Rating

24/7 Wall St.

Moody’s said today that budget negotiations during the 2013 congressional legislative session likely will determine the direction of the U.S. government’s Aaa rating and negative outlook.

In the Moody’s Investors Service report, “Update of the Outlook for the US Government Debt Rating,” the agency indicated:

If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable … If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.

No surprise there. Moody’s notes the difficulty in predicting when Congress will conclude negotiations that result in a budget package. The debt limit likely will be reached by end of this year, and the government’s ability to meet interest and other expenses with available resources should…

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