What Moody’s downgrade of U.S. credit rating means for your money

Moody’s decision to downgrade the U.S. credit rating may have consequences for your money, experts say.

The debt downgrade put immediate pressure on bond prices, sending yields higher on Monday morning. The 30-year U.S. bond yield traded above 5% and the 10-year yield topped 4.5%, hitting key levels at a time when the economy is already showing signs of strain from President Donald Trump’s unfolding tariff policy. Bond prices and yields move inversely.

Treasury bonds influence rates for a wide range of consumer loans like 30-year fixed mortgages, and to some extent also affect products including auto loans and credit cards.

“It’s really hard to avoid the impact on consumers,” said Brian Rehling, head of global fixed income strategy at Wells Fargo Investment Institute.

The major credit rating agency cut the United States’ sovereign credit rating on Friday by one notch to Aa1 from Aaa, the highest possible.

In doing so, it cited the increasing burden of the federal government’s budget deficit. Republicans’ attempts to make President Donald Trump‘s 2017 tax cuts permanent as part of the reconciliation package threaten to increase the federal debt by trillions of dollars.

“When our credit rating goes down, the expectation is that the cost of borrowing will increase,” said Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, D.C.

That’s because when “a country represents a bigger credit risk, the creditors will demand to be compensated with higher interest rates,” said Johnson, a member of CNBC’s Financial Advisor council.

Americans struggling to keep up with sky-high interest charges aren’t likely to get much relief anytime soon amid Moody’s downgrade.

“Economic uncertainty, especially regarding tariff policy, has the Fed — and a lot of businesses — on hold,” said Ted Rossman, a senior industry analyst at Bankrate.

Atlanta Fed President Raphael Bostic said Monday on CNBC’s “Squawk Box” that he now sees only one rate cut this year as the central bank tries to balance inflationary pressures with worries of a potential recession. Federal Reserve Chair Jerome Powell also recently noted that tariffs may slow growth and boost inflation, making it harder to lower the Fed’s benchmark as previously expected. 

Douglas Boneparth, another CFP and the president of Bone Fide Wealth in New York, agreed that the downgrade could translate to higher interest rates on consumer loans.

“Downgrades can raise borrowing costs over time,” said Boneparth, who is also on CNBC’s FA council.

“Think higher rates on mortgages, credit cards, and personal loans, especially if confidence in U.S. credit weakens further,” he said.