A series of rate hikes by the U.S. central bank has been putting more pressure on businesses as a number of defaults from companies in the world’s largest economy increased.
According to the data reported by Moody’s Investor Service, there have been 41 defaults in the U.S. and one in Canada since the beginning of this year, which is the most in any region globally and more than double of the number from the same period in 2022.
The Fed’s guidance from last week signalled for at least one more hike this year and possibly two by the U.S. central bank. Fed’s Chairman Jerome Powell made a remark saying that the FOMC broadly feels it will be suitable to raise rates again this year and perhaps two more times, but at a careful pace. The rate cut would not be happening anytime soon as the central bank wants to be confident that inflation will continue to move downward as a couple of rate hikes will take it there.
Bankers and analysts have been warning that high interest rates are the main cause of distress. Costs are rising at a fastest pace in decades as companies that are in need of more liquidity or sitting on a mountain of debt loans and in need of refinancing struggled with this new debt from higher interest rates.
According to S&P Global Market Intelligence, there were 324 bankruptcy filings in the U.S. from the beginning of this year up until June 22, which was slightly lower than a total of 374 filings the whole year of 2022.