Trump’s victory has contributed to a sell-off in government bonds this week, as key elements of his economic plans such as tax cuts and tariffs are expected to boost growth, but also higher inflation and larger budget deficits. .
Trump’s Republicans appeared poised to gain control of both chambers of Congress, a scenario that could allow for faster implementation of new policies.
“In the absence of policy measures to help limit fiscal deficits, the deterioration of the federal government’s fiscal strength will increasingly weigh on the U.S. sovereign credit profile,” Moody’s said in a Nov. 7 note.
“Given the tax policies that Trump promised during the campaign, and the high probability of their passage due to the changing composition of Congress, the risks to the fiscal strength of the United States have increased,” he added.
Moody’s is the last of the three major rating agencies to maintain a top rating for the US government.
In November last year it lowered the outlook on its U.S. triple-A credit rating to “negative” from “stable.”
It increases the risk of “potentially sharp and radical changes in tax, trade, immigration and climate policies, which could especially affect manufacturing, technology and retail trade,” he said of Republican control of the White House and the Capitol.
