Yellen: Negative Moody’s outlook on US is 'a decision that I disagree with'

Treasury Secretary Janet Yellen said she disagrees with the recent move by Moody’s Investors Service’s to shift the U.S. outlook from stable to negative.

“The American economy is fundamentally strong and Treasury securities remain the world’s preeminent safe and liquid asset,” Yellen said Monday following the APEC Finance Ministers’ Meeting in San Francisco.

The Moody’s move is “a decision that I disagree with,” Yellen added.

While the U.S. still has its “AAA” rating from Moody’s, the agency called higher interest rates and the rising debt a risk to America’s fiscal strength.

“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability,” Moody’s said in a statement Friday.

The agency also signaled it could move forward with the downgrade the U.S. given ongoing budget deficits and political divides.

“Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” the agency said.

Moody’s is the last of the three major ratings firms to maintain a “AAA” rating for the U.S.

Yellen also criticized Fitch Ratings’ decision to downgrade the U.S. from a “AAA” to “AA+” in August following a debt ceiling standoff between President Biden and the Republican-controlled House earlier in the summer.

S&P Global previously downgraded the U.S. to “AA+” in 2011 after a separate debt ceiling fight.

The move came one week before Congress’ second government shutdown deadline in as many months. 

Former Speaker Kevin McCarthy (R-Calif.) struck a deal with House Democrats to pass a stopgap funding measure just before the Sept. 30 deadline, which averted a shutdown but resulted in his ousting as speaker and a three-week search for his replacement.

Yellen also called on House Republicans, now led by Speaker Mike Johnson (R-La.), to avoid a government shutdown.

“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.