Higher borrowing costs have been hurting companies
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Corporate bankruptcies in the United States could reach the highest level since 2010 due to a sharp rise in borrowing costs and economic uncertainty, Guggenheim Investments has said this week, according to MarketWatch.
The report indicated that more than 450 corporations had already filed for bankruptcy protection this year through the end of August, exceeding annual totals for the past two years.
Guggenheim analysts said that a reacceleration of the US economy looks unlikely in the near future, due to the lack of supporting factors.
“The fading of these tailwinds will be a gradual process, but the peak of their support to the economy is now behind us. With less support from disinflation, fiscal policy, and the labor market, the economy should slow by the end of the year, and we think a recession is likely by early 2024,” the analysts warned.
Borrowing costs have surged since the Federal Reserve began to hike its policy rate to its current range of between 5.25% and 5.5%. On Wednesday, the regulator kept the benchmark rate unchanged at a 22-year high but signaled it could hike rates again in its fight to bring down inflation.
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