Yellen Reacts Sharply to Moody's Warning on "US Economy, Treasury Safety"

Moody's Opposes US Credit Rating Outlook Downgrade
"Committed to Establishing Trust and Sustainable Finances"

U.S. Treasury Secretary Janet Yellen recently criticized Moody's global credit rating agency's decision to downgrade the outlook on the U.S. sovereign credit rating, calling it a "disagreeable decision."

At a press conference held on the 13th (local time) in San Francisco, Yellen stated, "The U.S. economy is fundamentally strong, and U.S. Treasury securities remain the safest liquid assets in the world."

Earlier, on the 10th, Moody's downgraded the U.S. sovereign credit rating outlook from "stable" to "negative," citing large fiscal deficits and risks to debt repayment capacity. The market interpreted this as a warning that even Moody's, the only one among the three major rating agencies still maintaining the U.S. credit rating at 'Aaa,' might downgrade the U.S. credit rating.

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Yellen mentioned plans to reduce the fiscal deficit and invest in the Internal Revenue Service (IRS) to secure tax revenues, emphasizing that she is "fully committed to establishing a reliable and sustainable fiscal path."

Yellen’s direct emphasis on the strength of the U.S. economy and the safety of Treasury securities was a move to calm rapidly spreading market anxieties following Moody's action. Recently, concerns about the U.S. government's chronic fiscal deficits and national debt have been growing in Wall Street and academia. For the 2023 fiscal year, the U.S. government's fiscal deficit increased by 23% compared to the previous year, reaching $1.7 trillion (approximately 2,260 trillion KRW), and the national debt stands at $33.6 trillion (approximately 44,680 trillion KRW). Especially as high interest rates have caused the interest burden on U.S. Treasury debt to soar, voices expressing concern about the possibility of a U.S. Treasury default in the medium to long term have begun to emerge in the market.

At the press conference, Yellen stressed that while the U.S. economy and Treasury securities are strong and safe, a continued rise in long-term Treasury yields could pose challenges to the sustainability of U.S. debt.

Additionally, Yellen urged the House Republican majority to pass a follow-up budget to prevent a federal government shutdown caused by a budget gap. The U.S. federal government's 2024 fiscal year (October 2023 to September 2024) began on the 1st of last month, but Congress has only passed a 45-day temporary budget so far. If the formal budget for the next year is not passed by the 17th, a shutdown will be inevitable. Currently, House Speaker Mike Johnson, a Republican, has proposed a temporary budget with a deadline in February next year, but both the White House and hardline Republicans oppose it, making the situation difficult.

Yellen reiterated the urgency of passing the budget, saying, "The possibility of a government shutdown is an unnecessary economic headwind that hits just as the U.S. economy is cruising and moving in the right direction."

This content was produced with the assistance of AI translation services.