Diane Swonk, Chief Economist at KPMG, warns that higher interest rates are set to adversely impact small and mid-sized businesses who are set to reprice their loans this year, especially those not on fixed-price loans. Additionally, low-income consumers and younger borrowers are also facing challenges as their credit card rates continue to compound at a high rate. Many of these consumers have already maxed out their credit cards in order to make ends meet, leading to a rise in delinquencies as the burden of increasing interest rates takes its toll.
As interest rates remain high for an extended period of time, the negative effects are expected to deepen for businesses and consumers alike. Small and mid-sized businesses without fixed-price loans are particularly vulnerable to the financial strain imposed by rising interest rates as they reprice their loans. Similarly, low-income consumers and younger borrowers are feeling the impact as their credit card rates compound, especially for those who have exhausted their credit limits to cover their expenses. This situation is likely to lead to further increases in delinquencies as individuals struggle to keep up with their payments amidst escalating interest costs.
The compounding effect of high interest rates is already being felt in the economy, with delinquencies rising and businesses facing financial challenges. As the trend of higher interest rates persists, it is crucial for businesses and consumers to carefully reassess their financial strategies in order to navigate the changing economic landscape. Swonk’s warning serves as a reminder of the importance of monitoring and managing interest rate risks to avoid further financial strain in the future.
