The rating agency highlights a sharp rise in interest payments—from 9% of federal revenue in 2021 to a projected 30% by 2035—as the most critical threat to fiscal flexibility. Despite the US dollar’s global reserve status and strong demand for Treasuries, Moody’s cautioned that these strengths may no longer be enough to offset the effects of structurally high deficits, unfunded tax cuts, and growing entitlement costs. It forecasts the federal deficit reaching 8.5% of GDP by 2035, with debt-to-GDP rising to 130%, far above the 43% median for other Aaa-rated sovereigns.
Moody’s signalled further that the country’s “extraordinary economic strength” is no longer sufficient to shield it from credit pressures. With Treasury yields expected to average 4.4% in 2025, Moody’s sees limited room for fiscal recovery—absent major policy adjustments or a sharp decline in borrowing costs.
This article was written by Eamonn Sheridan at www.forexlive.com. Read More Details
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