Moody’s retained it’s AAA rating on the US after the raising of the debt ceiling in the US.

The United States as per Moody’s has “unmatched access to financing, means the US government can support higher debt levels than other governments.”

On August 8^th the credit rating agency released its Weekly Credit Outlook Publication in which it discussed the basis of their decision to confirm the rating:

• The unparalleled diversity and the size of the US economy and its long record of relative strong economic growth, based on both demographics and productivity. Even if the short term economic outlook seems weak, the long term remains favourable in relation to many other advanced economies. This provides a solid base for government finance.

• The US Dollar continues as the world’s de facto currency. This feature unique to the US provides unmatched access to financing, meaning that the US government can support higher debt levels than other governments. Over time, the dollar’s role may be eroded, but we see no immediate threat.

• Relative to other AAA rated economies US deficit is large but not so large that it warrants a downgrade. The debt position is somewhat high, but not out of line with the position of these countries. The projected trend of the US government debt is less favorable without further deficit reduction measures but they believe that such measures will be adopted. The less favourable debt ratio trend is already reflected in the negative outlook assigned to the current rating.

• A step in right direction was taken on August 2 with the passage of Budget Control Act, even if by itself it will not produce all the deficit reduction measure necessary to reverse the debt trajectory. Although the political process has been considerably more contentious than usual in the past few months, it finally did produce an agreement. We expect further fiscal measures over time, albeit with vigorous debate over the particulars.