Moody’s Investors Service has restored its stable outlook on the U.S. government bond rating, citing the improved fiscal outlook.
The rating agency announced that its has changed its outlook on the U.S. from negative back to stable, and affirmed the U.S. government’s ‘Aaa’ rating. “The action reflects Moody’s assessment that the federal government’s debt trajectory is on track to meet the criteria laid out in August 2011 for a return to a stable outlook, removing the downward pressure on the rating over Moody’s outlook period,” it explained.
Moody’s notes that U.S. budget deficits have been declining, and are expected to continue to decline over the next few years. And, it says that the growth of the U.S. economy, while still moderate, is progressing at a faster rate compared with several other Aaa-rated countries. It has also demonstrated a degree of resilience to major reductions in the growth of government spending, Moody’s notes.
It now forecasts that the U.S. government’s debt-to-GDP ratio will see a more pronounced decline through 2018 than Moody’s had anticipated when it assigned the negative outlook.
Moody’s also noted that despite the more favorable fiscal outlook over the next several years, without further fiscal consolidation efforts, government deficits are anticipated to increase once again over the longer term. “If left unaddressed, over time this situation could put the rating again under pressure,” it cautions.