Moody’s warns of risk of US government shutdown

The news: Ratings agency Moody’s has issued a warning that a potential US government shutdown from 1 October would negatively impact the country's credit.

The numbers: Moody’s is the last of the three major ratings agencies to still hold an "Aaa" rating for the US government with a stable outlook — the highest creditworthiness it assigns to borrowers. Last month, Fitch became the second rating agency to strip the United States of its prized triple-A rating.

The context: The US Congress has so far failed to pass any spending bills to fund federal agency programs in the fiscal year starting on 1 October amid a Republican Party feud. It comes just a few months after political brinkmanship around the debt limit threatened to cause a US sovereign debt default. A possible shutdown would be further evidence of how political polarisation in Washington is weakening fiscal policy making at a time of rising pressures on US government debt affordability because of higher interest rates, Moody's analyst William Foster told Reuters. Last month, Fitch also cited a deterioration in governance and political polarisation as factors that prompted it to downgrade the US government's credit rating.