Yellen disagrees with Moody's assessment of US debt outlook

US Treasury Secretary Janet Yellen expressed her disagreement on Monday with Moody's recent decision to downgrade its outlook on US debt. Yellen emphasised that the US economy remains robust, and the Treasury market remains safe and highly liquid.

Speaking at a news conference following the APEC Finance Ministers' Meeting in San Francisco, California, Yellen stated, "This is a decision I disagree with," in response to Moody's decision to revise the US credit rating outlook from "stable" to "negative." 

Moody's cited concerns about substantial fiscal deficits and a decrease in debt affordability as reasons for the downgrade.

While acknowledging that a sustained increase in long-term interest rates could pose challenges to debt sustainability, Yellen assured that the Biden administration is fully committed to maintaining a credible and sustainable fiscal path. She pointed to plans aimed at reducing the deficit and strengthening the Internal Revenue Service to enhance tax collection.

Yellen also called upon House Republicans to collaborate in averting a potential partial government shutdown that could occur by the end of the week, marking the third fiscal standoff of the year. She stressed that such a shutdown would be an "unnecessary economic headwind" at a time when the US economy is performing well and heading in the right direction.

In addition, the US Treasury reported that the federal budget deficit in October decreased by nearly a quarter compared to the previous year. This reduction was attributed to record-high revenues for the month, largely due to an influx of delayed tax payments from areas affected by disasters. Notably, the fiscal deficit for fiscal year 2023, which concluded on September 30, was the largest outside the COVID-19 pandemic era, amounting to nearly $1.7 trillion.

(With Reuters Inputs)