Forex News – Moody’s suggest U.S. government remove statutory debt limit

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Moody’s proposed to the U.S. government that it should no longer impose a statutory debt limit on Treasury debt in order to reduce uncertainty among bond holders, and to look for other ways to limit debt.

The ratings agency said in a report today that the U.S. is one of the few countries where Congress sets a ceiling on government debt, which creates “periodic uncertainty” over the government’s ability to meet its obligations.

“We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” Moody’s analyst Steven Hess wrote in the report.

In the United States, Moody’s said the debt limit had not effectively curbed the rise in government debt because lawmakers regularly raise it and because that limit is not related to the level of expenditures approved by Congress.

Last week, Moody’s threatened it would cut the United States’ top notch triple-A credit rating if the government misses debt payments, increasing pressure on Republicans and the White House to reach a budget deal soon. So far there has been a deadlock in talks but the White House has set a deadline for a deal to be reached by July 22.