Money

Moody’s downgrades U.S. credit rating amid rising debt

Moody’s downgrades US credit rating to Aa1, citing rising government debt and interest costs amid ongoing fiscal deficits.

Published

4 weeks ago

May 18, 2025

Ahron Young

Moody’s downgrades US credit rating to Aa1, citing rising government debt and interest costs amid ongoing fiscal deficits.

In Short:
Moody’s has downgraded the US credit rating from Aaa to Aa1 due to rising government debt and interest costs. This downgrade may lead to higher yields on Treasury debt and highlights the need for significant fiscal reforms to address a substantial budget deficit.

Moody’s has downgraded the United States’ credit rating from Aaa to Aa1, marking a significant setback for the nation.

The downgrade comes amid escalating government debt and rising interest costs associated with the federal budget deficit, which Moody’s states have reached levels higher than other similarly rated countries.

As a result of this adjustment, investors may demand higher yields on U.S. Treasury debt, reflecting increased risk. The yield on the 10-year Treasury note rose to 4.48% in after-hours trading, while major stock indices also faced declines.

Moody’s had previously maintained the highest rating for U.S. sovereign debt but has now aligned its rating with rivals like Standard & Poor’s and Fitch Ratings, which also downgraded the U.S. in recent years.

The U.S. is currently grappling with a substantial budget deficit of $1.05 trillion, significantly higher than the previous year. Analysts predict that without substantial fiscal reforms, federal deficits will continue to widen.

The potential extension of tax cuts from the 2017 Tax Cuts and Jobs Act could exacerbate these issues, pushing federal deficits to nearly 9% of GDP by 2035.

Economists have noted a decrease in foreign demand for U.S. Treasuries, indicating a changing perception among investors regarding U.S. debt. The Moody’s downgrade is seen as a wake-up call for policymakers, as the U.S. faces continual pressure to address fiscal challenges.

Money

Markets ignore Israeli-Iranian conflict but risks remain high

Markets remain optimistic despite the escalating Israel-Iran conflict, raising concerns of potential complacency among investors.

Published

5 hours ago

June 17, 2025

Ahron Young

Markets remain optimistic despite the escalating Israel-Iran conflict, raising concerns of potential complacency among investors.

In Short:
Market analysts warn that global investors are underestimating the conflict between Israel and Iran, despite resilient stock market gains. Analysts highlight the potential for prolonged conflict and significant impacts on energy markets, cautioning against complacency.

Global investors are currently underestimating the potential impact of the ongoing conflict between Israel and Iran, according to market analysts.

Despite four days of escalating fighting, which has resulted in significant casualties, global stock markets have shown resilience. Stocks in Europe, Asia-Pacific, and the U.S. have all seen gains, indicating a disconnect between market performance and geopolitical developments.

Investment director Russ Mould highlighted the risk of a broader conflict affecting energy markets. He noted that the situation is complex and the ramifications could extend beyond financial concerns.

Heightened risks

Strategist David Roche suggested the conflict may last longer than typical Israeli responses, posing heightened risks. Torbjorn Soltvedt from Verisk Maplecroft expressed that the current situation resembles an open-ended war, with severe implications for the region and global energy markets.

Energy prices have already reacted to the unrest, with crude oil experiencing significant price fluctuations. Analysts caution that a period of calm might lead markets to mistakenly believe in lasting peace, potentially creating buying opportunities in energy assets.

Conversely, some analysts, like Deutsche Bank’s Jim Reid, maintain a more cautious outlook, noting that retaliatory actions between Iran and Israel have yet to escalate dramatically. He indicated that historical patterns suggest a typical market recovery from such shocks.

Money

Australia’s stalled economy forces businesses to innovate or die

Australia’s economy is slowing with 0.2% GDP growth; experts suggest interest rate cuts, prompting businesses to adapt for growth.

Published

6 days ago

June 11, 2025

Ahron Young

Australia’s economy is slowing with 0.2% GDP growth; experts suggest interest rate cuts, prompting businesses to adapt for growth.

Australia’s economy is slowing fast, with GDP growth at just 0.2% and output per person in decline. Experts are now predicting steep interest rate cuts to avoid recession.

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Money

World Bank predicts U.S. growth cut by tariffs

World Bank forecasts U.S. growth halving due to tariffs; global economy also faces significant slowdown, especially in exports.

Published

6 days ago

June 11, 2025

Ahron Young

World Bank forecasts U.S. growth halving due to tariffs; global economy also faces significant slowdown, especially in exports.

In Short:
The World Bank has downgraded U.S. growth projections to 1.4% for 2025 due to President Trump’s tariff policies, warning that increased tariffs could worsen the global economic slowdown. The report highlights a decline in growth for multiple economies, with a particular emphasis on the negative impact on living standards and the need for negotiated trade barriers.

The World Bank has downgraded its growth projections for the U.S. economy, forecasting an increase of just 1.4% in 2025, down from the previous year’s 2.8%. This reduction is attributed to President Trump’s tariff policies, which are anticipated to hamper both U.S. and global growth.

The World Bank’s latest report highlights an expected slowdown in multiple economies, including the eurozone, Japan, and India. Mexico is projected to experience the most significant impact, with growth dropping to 0.2% from 1.5%.

Exacerbate the slowdown

Amid these forecasts, the World Bank warned that a further rise in tariffs could exacerbate the slowdown. If tariffs were raised by an additional 10 percentage points, global growth could plummet to 1.8% this year and 2% in 2026. Such an escalation would lead to reduced trade, declining confidence, and increased market turmoil.

Indermit Gill, the World Bank’s chief economist, noted that if a course correction is not made, the negative effects on living standards could be severe. The Organisation for Economic Cooperation and Development has also voiced concerns about the implications of tariffs, predicting a U.S. growth rate of 1.6% with inflation approaching 4%.