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Moody's Warns of Growth Risks from Rising Rates
Moody's has confirmed that rising U.S. interest rates threaten economic growth and exert pressure on financial markets. The agency's chief economist warned that a prolonged period of rising interest rates could lead to economic deterioration, with expectations of an additional three to four hikes next year, including 2026. He pointed out that the increase in long-term bond yields, which have reached their highest level in 20 years, raises borrowing costs and harms companies and households, particularly those reliant on loans. However, he clarified that technology firms dependent on artificial intelligence might be less affected due to their ability to absorb costs thanks to high profit margins. Zandi also expressed concern about a potential U.S. debt ceiling crisis in the upcoming fall, warning of political repercussions that could cause disruptions in the bond market. While the impact of rising interest rates on the stock market is expected to be gradual, it could exert greater pressure if corporate earnings come in below expectations.
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