WASHINGTON -- The shrinking budget deficit and improving economy has led
But Moody's warned that failure to address the long-term budget deficit "could put the rating again under pressure" down the road.
For the short term, however, the tax increases and automatic federal spending cuts that began this year have helped cause a "steep decline" in the budget deficit that warranted removing the negative outlook, Moody's said.
"The U.S. budget deficits have been declining and are expected to continue to decline over the next few years," Moody's said Thursday.
"Furthermore, the growth of the U.S. economy, which, while moderate, is currently progressing at a faster rate compared with several AAA peers and has demonstrated a degree of resilience to major reductions in the growth of government spending," Moody's said.
The reduction would lower the deficit to 4% of total economic output in 2013 from 7% the previous year. Moody's said that was a greater decline than it anticipated when placing the U.S. rating on a negative outlook in 2011.
The move Thursday by Moody's came after another leading credit rating company, Standard & Poor's, upgraded its U.S. outlook last month to stable from negative as well.
S&P, however, had downgraded the U.S. rating to AA+ in 2011 after the divisive debate over raising the debt limit.
Moody's and Fitch Ratings kept the U.S. at AAA status at the time but put the federal government on a negative outlook, which meant a downgrade could take place in three to five years.
Last month Fitch affirmed its AAA rating for U.S. debt but kept the rating on a negative watch, citing continued uncertainty about medium- and long-term deficit reduction measures as well as "a timely increase in the debt limit."
The improving deficit picture has pushed off the need to raise the debt limit until after
Republicans want more budget cuts in exchange for another debt limit increase, while President