06:56 AM EDT, 05/19/2025 (MT Newswires) -- Moody's downgraded the US government's credit ratings amid rising debt and fiscal deficits, but revised its outlook to stable from negative.

The ratings agency on Friday lowered the world's largest economy's long-term issuer and senior unsecured ratings to Aa1 from Aaa, reflecting the increase in government debt and interest payment ratios over more than a decade "to levels that are significantly higher than similarly rated sovereigns."

Successive US administrations and Congress have been unable to finalize measures to reverse the trends of large annual fiscal deficits and growing interest costs, according to Moody's. It anticipates larger deficits over the next decade as federal spending rises and government revenue remains largely flat.

"Large fiscal deficits will drive the government's debt and interest burden higher," the agency said in its report. "The US' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns."

Earlier in May, the Federal Reserve left its benchmark lending rate unchanged and warned that upside risks to inflation and unemployment had increased. At the end of April, government data showed that the US economy contracted in the March quarter, representing the first quarterly decline in three years.

Moody's changed the outlook on the US to stable from negative, citing the country's "exceptional" credit strengths amid the size, resilience, and dynamic nature of its economy, as well as the role of the US dollar as a global reserve currency.

"While recent months have been characterized by a degree of policy uncertainty, we expect that the US will continue its long history of very effective monetary policy led by an independent Federal Reserve," according to Moody's.

Moody's said fiscal reforms to significantly slow and eventually reverse the deterioration in debt affordability and fiscal deficits could lead to an upgrade. A material weakness of the country's credit profile due to the erosion of policy effectiveness or institutional strength could result in a downgrade, the agency added.