The recent rise in interest rates has had a significant impact on consumer companies, raising concerns among borrowers who hold variable-rate loans. The Institute for Supply Management’s index has reported an increase in business conditions for service sector companies like restaurants and hotels, reaching 53.9% in June compared to 50.3% the previous month. This surpassed the predictions of economists.
Quincy Krosby, the chief global strategist at brokerage LPL Financial, stated that while the economy is slowing down, it is still holding steady. However, the sudden shift from near-zero interest rates to higher rates is causing distress for borrowers, particularly those who had initially secured loans at a low 2% rate. Krosby cautioned that as borrowers face the need to refinance, they are now dealt with higher costs and this will ultimately result in repricing of various assets.
It is important for borrowers and businesses to be aware of the potential effects of rising rates, even if they are not exorbitantly high historically. Adapting to this changing environment is crucial for financial stability and wise decision-making.
