Moody's warns of rating downgrade if US goes for a shutdown

Brokerage firm Moody's has a stern warning for the US economy as the threat of the national shutdown in the world's biggest economy on October 1 is looming large.

The brokerage says the US credit rating will be at risk if the nation goes for a shutdown on October 1.

In a warning that can sound the alarm bell among economic policymakers in the US, Moody's said that the country's current AAA rating may be downgraded.

The warning comes nearly two months after another renowned brokerage, Fitch Ratings, downgraded the US rating from AAA to AA citing the debt ceiling crisis.

The federal government in the US is moving in the direction of a shutdown as Republicans in the House are demanding deep rate cuts, forcing a confrontation over federal spending.

On the other hand, Democrats are opposing the shutdown, saying that it would cause widespread suffering, including a rapid loss of food benefits for around 7 million low-income US women and children.

Republicans and Democrats are yet to reach consensus on the shutdown.

At present, Moody's is the only major rating agency with an AAA rating on the US after Fitch's downgrade of the country's rating.

Another famous brokerage, S&P, downgraded the US' ranking in 2011 and has not upgraded ever since.

Moody's said that the government must agree on a new budget deal by the end of this week to avoid an impact on the economic and political stability of the country.