SAN FRANCISCO - A $5.7 trillion borrowing binge by U.S. companies could make a slowdown in the world’s biggest economy even more painful and is one more reason the Federal Reserve was wise to put interest rate hikes on hold, Robert Kaplan, president of the Dallas Fed, said.
“It’s something that I’m aware of, which sort of reinforces for me why I feel we should be taking no action for some period of time,” Kaplan said in an interview with Reuters ahead of the publication on Tuesday of an analysis of U.S. corporate debt. He said that is “yet another reason why I think we are wise — inflation is not running away from us — I think we are wise to take a very patient approach.”
Companies gorged for years on cheap debt made possible by the Fed’s near-zero interest rates after the financial crisis. With America’s corporate debt load now equating to a record 46 percent of gross domestic product, a growing number of bankers and investors have urged the Fed to pay more attention.
Scary .....
The Fed encourages the problem by keeping borrowing rates artificially low. The Fed is the problem, not the cure.
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Source: CNBC - 🏆 12. / 72 Read more »