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Corporate Interest Expenses Are Expected to Increase Further

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Abstract

Although firm leverage has fallen from pandemic highs, rising interest rates have raised firms’ interest expenses. The effects of this monetary policy tightening are likely to continue unfolding over the next few years. As low-yield, fixed-rate corporate debt issued during the pandemic matures, firms may need to refinance this debt at higher rates, further increasing their interest expenses. However, most corporations are well-positioned to carry these interest expenses so long as their earnings remain stable.

Suggested Citation

  • Phillip An & Huixin Bi & W. Blake Marsh, 2024. "Corporate Interest Expenses Are Expected to Increase Further," Economic Bulletin, Federal Reserve Bank of Kansas City, February.
    • Handle: RePEc:fip:fedkeb:97756
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    1. Ippolito, Filippo & Ozdagli, Ali K. & Perez-Orive, Ander, 2018. "The transmission of monetary policy through bank lending: The floating rate channel," Journal of Monetary Economics, Elsevier, vol. 95(C), pages 49-71.
    2. Viral V Acharya & Sascha Steffen, 2020. "The Risk of Being a Fallen Angel and the Corporate Dash for Cash in the Midst of COVID," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(3), pages 430-471.
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