Moody's: Government Shutdown Would Be "Credit Negative"

Ratings agency Moody's said in a statement today that a US government shutdown would be "credit negative" despite a prevailing view that the economic impact would be limited.

• Moody's said in a statement: "A shutdown would be credit negative for the US sovereign... In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability."
• The Moody's statement has parallels with Fitch, who argued, when downgrading the US economy in August, "there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters," adding that, "repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management."
• When Congress returns tomorrow it will have four days to pass a short-term funding measure to avert a government shutdown on October 1. With a lack of progress resolving differences between GOP leadership and conservatives a shutdown appears likely.
• Note: Moody's are the only remaining 'big three' agency to rate the US at the equivalent of AAA.
• See today's MNI US Daily Brief for additional analysis.