US Treasury Secretary Janet Yellen said she disagrees with Moody’s Investors Service’s shift to a negative outlook on the country’s Aaa credit rating, expressing confidence in the economy and in Treasuries as a safe asset.
“The American economy is fundamentally strong and Treasury securities remain the world’s preeminent safe and liquid asset,” Yellen said Monday at a press conference in San Francisco following a day of meetings between finance ministers from across the Pacific Rim. The Moody’s action is “a decision that I disagree with,” she said.
Yellen’s comments came three days after the US was threatened with the loss of its last top credit rating. Moody’s signaled it was inclined to downgrade the nation because of wider budget deficits and political polarization.
While the US has enjoyed a surprisingly resilient economy, a ballooning deficit points to longer-term fiscal risks that in recent months have spurred fresh warnings from economists, politicians and credit-rating agencies. For the fiscal year through September, the US deficit effectively doubled.
Moody’s is the only of the three main assessors with a top rating for the US since Fitch Ratings downgraded the US government in August following the latest debt-ceiling battle. S&P Global Ratings stripped the US of its top score in 2011 amid that year’s debt-limit crisis.
Since Fitch’s move, a government shutdown was averted at the last minute, Congress was paralyzed when the House speaker was ousted and Republicans spent weeks trying to elect a new one.
The possibility of another closure is a few days away amid another partisan standoff in Washington over the budget. Republicans in the House, where they hold a majority, are aiming to force cuts in spending that Democrats, who control the Senate, reject. Funding runs out after Nov. 17.
“A shutdown is something that poses an unnecessary economic headwind in a moment when the US economy is doing well and moving in the right direction,” Yellen said.
