Moody's: Hitting debt ceiling won't affect US credit rating

Moody's: Hitting debt ceiling won't affect US credit rating
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Hitting the debt ceiling won’t impact the United States’ standing with one key credit agency.

Moody’s Investors Service said Monday that it won’t dock the country’s AAA credit rating if the government doesn’t immediately raise the federal limit on how much debt the U.S. can hold.

The federal government is expected to hit the debt ceiling on March 15 or 16. The U.S. wouldn’t be allowed to take on any more debt, so the Treasury will take “extraordinary measures” to make essential payments without increasing the debt.

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Moody’s said it expects the federal government to raise the debt ceiling before risking a default and that extraordinary measures would give lawmakers enough time — roughly until October or November — to reach a deal.

"Since the ceiling does not explicitly restrict the government's ability to refinance existing debt, and the government's market access is not in question, the only question relates to interest payments, for which the government can use extraordinary measures." said Sarah Carlson, a senior vice president at Moody's.

Treasury Secretary Steven Mnuchin asked Congress in a letter last week to raise the debt ceiling as soon as possible. But Moody’s said raising the debt ceiling after extraordinary measures run out wouldn’t affect the country’s credit standing.

"Given the current political configuration, we expect that a compromise would be reached well in advance of the US Treasury exhausting its extraordinary measures," said Carlson.

Moody’s preserved the country’s AAA rating during the 2011 debt ceiling showdown as well, while Standard & Poor’s knocked the U.S. rating down to AA+.