What is a Moody's Rating?

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What is a Moody’s Rating?

🇺🇸 What’s Going On?

• On May 16, 2025, Moody’s officially downgraded the U.S. credit rating from Aaa to Aa1.

• This marks the first time the U.S. has lost its perfect credit rating from all three major agencies: S&P downgraded in 2011, Fitch in 2023, and now Moody’s in 2025.

• Why? Moody’s cited growing national debt, rising interest costs, and repeated political standoffs over the federal budget.

💳 Quick Explainer: What’s Moody’s and What Do These Ratings Mean?

• Moody’s is one of the big three credit rating agencies. They judge how likely it is a country will repay its debts on time.

• These are long-term credit ratings—like a financial report card for countries and big institutions.

Moody’s Credit Ratings – Simplified:

• Aaa – Exceptional ability to repay debt (the best of the best)

• Aa1, Aa2, Aa3 – Very strong, but slightly more risk than Aaa

• A1, A2, A3 – Strong, but more affected by changes in the economy

• Baa1 to Baa3 – Still “investment grade,” but noticeably more risk
  (Anything below Baa3 is considered "junk" or high-risk debt)

⚠️ What Are the Implications of a Lower Moody’s Rating?

• Higher borrowing costs: The U.S. may have to pay more interest to borrow money, adding even more to the national debt.

• Potential ripple effects: States, cities, and everyday Americans could face higher interest rates on loans and mortgages tied to federal benchmarks.

• Investor confidence shaken: Some global investors may rethink their portfolios, which could impact the dollar, stocks, and even retirement accounts.

• Pressure on policymakers: It sends a strong message to Congress — fix the dysfunction or risk further economic fallout.

🧠 Pop Quiz!

Why did Moody’s downgrade the U.S. credit rating in 2025?
A. Low tax revenue
B. Rising debt and political gridlock
C. Falling stock market

→ Correct Answer: B

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