Credit rating agency Moody’s on Thursday said that the US must make its mid-June interest payments to preserve its highest investment grade rating at AAA grade.
“That’s a really important date for us,” William Foster, a senior vice president at Moody’s told Bloomberg, referring to the June 15 debt payment due date. But Foster emphasised that Moody’s does expect the White House and the US Congress to strike a deal to raise or suspend the debt limit.
Any downgrade in the credit ratings of sovereign debt will not just harm investor confidence but also reduce the United States’ ability to attract capital for fueling economic growth.
However, Moody’s warning is not good news for the world’s largest economy, where negotiations for a debt limit deal shows no clear progress. If a deal is not reached by the end of this month, the United States will start running out of funds to pay for its obligations.
About $2 billion in interest payments are due to the the US treasury on June 15. However, US Treasury Secretary Janet Yellen has said that the odds of reaching June 15th, while being able to pay all of our bills, is quite low.
Moody’s reminder comes just days after another credit rating agency Fitch warned of a potential downgrade of United States’ sovereign debt if a deal is not sealed by May-end.
Debt limit deadlock continues
One of the top negotiators has claimed that Republican and White House disagreements are narrowing over extending the US debt ceiling. But the negotiator added that they have still not achieved a deal to prevent a looming default.
Another Republican leader, Kevin Mccarthy, told reporters that the teams have made “some progress” towards a deal. “I don’t think everybody is going to be happy at the end of the day. That’s not how this system works,” Mccarthy said.
While the White House and the US Treasury believe that Fitch’s warning underscored the urgency of reaching a speedy resolution to the standoff, Mccarthy has argued that negotiators do not need credit ratings agency to remind them of the importance of concluding a deal.
With June 1 just a week away, any deal will need speedy action in both chambers of the US Congress to reach president Joe Biden’s desk in time.
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