Aurelia Butler

NEW YORK (Reuters) -A U.S. government shutdown would harm the country’s credit, rating agency Moody’s (NYSE:MCO) said on Monday, a stern warning coming one month after Fitch downgraded the U.S. by one notch on the back of a debt ceiling crisis.U.S. government services would be disrupted and hundreds of thousands of federal workers furloughed without pay if Congress fails to provide funding for the fiscal year starting Oct. 1.A possible shutdown would be further evidence of how political polarization in Washington is weakening fiscal policymaking at a time of rising pressures on U.S. government debt affordability because of higher interest rates, Moody’s analyst William Foster told Reuters.”If there is not an effective fiscal policy response to try to offset those pressures … then the likelihood of that having an increasingly negative impact on the credit profile will be there,” said Foster. “And that could lead to a negative outlook, potentially a downgrade at some point, if those pressures aren’t addressed.”Moody’s rates the U.S. government “Aaa” with a stable outlook, the highest creditworthiness it assigns to borrowers. It is the last major agency to maintain such a rating for the U.S. after Fitch downgraded the government by one notch in August to AA+ – the same rating assigned by S&P Global in 2011.”Fiscal policymaking is less robust in the U.S. than in many Aaa-rated peers, and another shutdown would be further evidence of this weakness,” Moody’s said in a statement.President Joe Biden’s top economic adviser, Lael Brainard, said the Moody’s comment highlighted the risks caused by the congressional maneuvering.”Today’s statement from Moody’s underscores that a Republican shutdown would be reckless, create completely unnecessary risks for our economy, and lead to disruptions for communities and families across the country,” Brainard, director of the National Economic Council, said in a statement.”Congress must do its job and keep the government open.”A Treasury spokesperson said the Moody’s report delivered “further evidence that a shutdown could undercut our current economic momentum” at a time when inflation and unemployment were both below 4%.Moody’s said the economic impact of a shutdown would likely be limited and short-lived, with the most direct effect from lower government spending, and the negatives growing the longer the shutdown lasts.Congress so far has failed to pass any spending bills to fund federal agency programs in the fiscal year starting on Oct. 1 amid a Republican Party feud.The shutdown would not affect government debt payments. Earlier this year political brinkmanship around the U.S. debt limit threatened to cause a U.S. sovereign debt default.That crisis, even though it was eventually resolved before any missed debt payment, was a major factor leading Fitch’s downgrade last month.”In this environment of higher rates for longer and pressures building on the debt affordability front, it’s that much more important that fiscal policy can respond,” said Foster at Moody’s.”And it looks increasingly challenged because of things like the government shutdown and having come off the debt limit episode, because it’s such a polarized political dynamic in Washington,” he said. More

If the increase in oil prices persists, it could potentially decelerate consumption and economic growth. However, strategists at Goldman Sachs have indicated that such a scenario would represent a bearable obstacle for the U.S. economy. They maintain that despite the potential negative impact on consumption and economic growth, the resilience of the U.S. economy will be tested but manageable if the rise in oil prices continues.The upward trend in energy prices is contributing significantly to headline inflation, amplifying the challenges faced by the Federal Reserve. The central bank’s efforts to manage these inflationary pressures are being tested as it navigates the escalating cost of energy.Strategists at Goldman Sachs continue to express confidence in the resilience of the U.S. economy amidst these challenges. They anticipate that the economy will be able to withstand this headwind if the rise in oil prices persists over the coming months.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

WASHINGTON (Reuters) – The Institute of International Finance said on Monday it would still hold its annual membership meeting in Marrakech on Oct. 12-14, following the World Bank and International Monetary Fund decision to stick to their own Morocco meeting plans after a devastating Sept. 8 earthquake.The IIF, the global banking industry’s premier trade group, said its parallel meeting would bring together central bankers, policymakers and top finance executives to discuss key issues, including the global economic outlook, climate transition finance and emerging market debt.The group said it will offer its members opportunities to support local vendors and artisans in the Marrakech community and donate to World Central Kitchen’s relief efforts in Morocco, its designated charity for the meetings. The 6.8-magnitude earthquake centered 45 miles (72 km) from Marrakech killed more than 2,900 people and damaged nearly 60,000 homes in 2,930 villages, mostly in the High Atlas (NYSE:ATCO) mountains, with a total population of 2.8 million people, the Moroccan government said on Friday.Marrakech suffered some damage in its ancient Medina quarter, but more modern parts of the city, including hotels and the IMF-World Bank venue, are intact. The IMF, World Bank and IIF meetings are jointly expected to bring more than 10,000 people to Marrakech.IIF President and CEO Tim Adams said in a statement that the meetings in Marrakech come “at a time when our mission of fostering financial stability and sustainable growth is more critical than ever.””The global financial industry is the engine of economic growth and resilience. And this year, our mission takes on an added layer of significance following the tragic earthquake in Morocco,” Adams said.Among policy makers on the IIF’s meeting agenda are Bank of England Governor Andrew Bailey, European Commission financial services commissioner Mairead McGuinness, European Central Bank policymaker Francois Villeroy de Galhau and Monetary Authority of Singapore Managing Director Ravi Menon. More