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Moody's: US hitting new debt ceiling won't hurt rating

Debt rater Moody's said on Wednesday that the United States's top-grade AAA rating would not likely be affected by the country hitting its borrowing ceiling this week.

WASHINGTON: Debt rater Moody's said on Wednesday that the United States's top-grade AAA rating would not likely be affected by the country hitting its borrowing ceiling this week.

Despite the US Treasury's warning that the cap to be placed on its borrowing on Friday will constrain its ability to meet its obligations by the end this month, Moody's said it believes the US will not default on its debt.

"Even if Congress fails to raise the limit in time, the US Treasury will continue to have the means to pay the interest on its debt," the agency said.

Facing a chronic deficit projected at $514 billion this year, the Treasury needs to constantly borrow more funds to bridge the gap.

But based on current law, a cap will be set at the outstanding debt on Friday -- at a level around the current $17.3 trillion-- unless Congress acts to raise the limit.

The Treasury says it can adjust its operations to keep up with all of its expenditure obligations without additional funding through the end of February, but after that, it will be unable to meet all the demands.

Moody's suggested though that the Treasury would be able to manage expenditure cuts without too much difficulty after that, and that it expected Congress to act in any case before the impact was severe.

"The debt limit, therefore, is not a significant threat to the ability of the US government to service its debt obligations," it said.

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