Moody's Investors Service said on Thursday that it expected to put the U.S. government's rating on review for possible downgrade

Moody's Investors Service said on Thursday that it expected to put the U.S. government's rating on review for possible downgrade if there is no progress on increasing the statutory debt limit in coming weeks.

Moody's said in a statement that the degree of political conflict over an increase in the statutory debt limit has " exceeded expectations", which increased the odds of a short-lived default.

Moody's said the Aaa rating will be maintained if the debt limit is raised and default avoided. However, the rating outlook will depend on the outcome of negotiations on deficit reduction.

"A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody's to change its outlook to negative on the Aaa rating," Moody's said.

Moody also explained that the debt limit negotiations in Washington represent "a real near-term opportunity" for agreement on a plan for fiscal consolidation. Therefore, failure to reach an agreement as part of the current negotiations would increase the likelihood of a negative outlook in the near term, because the upward debt trajectory would still be in place.

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