By Keiko Ujikane and Jason Clenfield
June 23 (Bloomberg) -- The U.S. government’s Aaa credit rating “remains solid,” said Pierre Cailleteau, managing director of sovereign risk at Moody’s Investors Service.
“Although the U.S. is losing altitude in the Aaa range, it is starting from a very strong base,” Cailleteau, who is chief international economist at Moody’s, said in Tokyo today. The economy is resilient enough to recover and the government is committed to raising taxes and cutting spending, he said.
The Congressional Budget Office projects the federal budget shortfall will reach a record $1.85 trillion this year as President Barack Obama tries to spend his way out of the worst recession in at least five decades. Obama has committed to reining in the budget deficit once a recovery is under way.
New York-based Moody’s last month affirmed the top credit rating for the U.S., saying it’s supported by “a diverse and resilient economy, strong government institutions, high per- capita income, and a central position in the global economy.”
Cailleteau said the dollar’s status as the world’s reserve currency won’t change soon. The U.S. economy has shrunk less than others including Germany and France even though it was at the center of the global financial crisis, the economist said.
The U.K. is also well placed to manage its debt, Cailleteau said. Standard & Poor’s lowered the U.K.’s rating outlook to “negative” from “stable” in May.
Cailleteau said it may take a decade for governments around the world to repair their finances after increasing spending to prop up their economies amid the global recession. Japan’s economic rebound is likely to be sluggish, he said.
Thomas J. Byrne, senior vice president of Moody’s, said at the same gathering that Japan’s Aa2 credit rating is consistent with the midterm outlook for the government’s finances.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net.
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