Moody's eases off threat of U.S. rating cut, affirms Aaa

Thu Jul 18, 2013 6:14pm EDT
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NEW YORK (Reuters) - Moody's Investors Service on Thursday raised the U.S. sovereign outlook to stable from negative and affirmed the country's triple-A rating, citing steady growth despite reduced government spending.

The rating agency's move eased the threat of a cut to the world's biggest economy.

Moody's said the federal government's debt trajectory is on track with criteria the rating agency previously laid out, even without further budget measures from Washington.

The economy is growing moderately, but it is still "progressing at a faster rate compared with several Aaa peers and has demonstrated a degree of resilience to major reductions in the growth of government spending," Moody's said in a statement.

The U.S. budget outlook has brightened in recent months, alleviating some of the pressure on policymakers for more fiscal compromises.

On May 14, the non-partisan Congressional Budget Office said the U.S. federal budget deficit is shrinking at a faster pace than expected, and forecast this fiscal year would end with the smallest shortfall since 2008.

"We feel that we have enough information on the debt trajectory at this point to make a conclusion even without information on any possible further actions in Washington," said Steven Hess, Moody's lead U.S. sovereign credit analyst.

Even the possibility of further debate on raising the U.S. debt ceiling this year - allowing the government to keep borrowing money - is unlikely to hurt the rating, Hess said.

"We think that they will raise the debt ceiling, as they always have in the past," he said. "But even if there's some delay, we're not too concerned about that affecting the government's ability to service its debt."   Continued...

A Moody's sign on the 7 World Trade Center tower is photographed in New York August 2, 2011. REUTERS/Mike Segar