Reversing Moody’s judgement from last week to lower its outlook on US debt, U.S. Treasury Secretary Janet Yellen has stated that the country’s economy is robust and the Treasury market is secure and liquid.

“This is a decision I disagree with,” she said at a news conference at the close of the APEC Finance Ministers’ Meeting in San Francisco, California.

The ratings agency downgraded the U.S. credit rating from “stable” to “negative” on Friday, citing significant fiscal deficits and a decrease in debt affordability.

Yellen recognised that if long-term interest rates continue to climb, it would be difficult to sustain debt.

She did, however, point out that the Biden administration is “wholly committed to a credible and sustainable fiscal path,” emphasising initiatives to lower the deficit and boost the Internal Revenue Service, which is responsible for collecting taxes.

In addition, Yellen urged House Republicans to take steps to prevent a potential partial government shutdown that might occur by this coming weekend.

This year’s third fiscal impasse comes after a protracted standoff in the spring that nearly drove the federal government into default.

“An unnecessary economic headwind in a moment when the U.S. economy is doing well and moving in the right direction,” according to Yellen, is the prospect of a government shutdown.

The U.S. Treasury said on Monday that the October federal budget deficit decreased by about 25% compared to the same month last year, as revenues reached a record high due to the inflow of overdue tax payments from areas affected by natural disasters.

According to data released this month, the fiscal 2023 deficit—which ended on September 30—was about $1.7 trillion, the highest since the COVID-19 era.

(Adapted from Bloomberg.com)

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