A year and a half into the Federal Reserve’s campaign of anti-inflation interest rate hikes meant to slow the economy, companies are only just beginning to feel the impact on their finances.

That’s according to a study released Tuesday by researchers at the Federal Reserve Bank of Boston, which showed that historically, it takes about five quarters for the Fed’s rate hikes to push up interest payments for businesses. 

The central bank began raising its influential benchmark interest rate in March 2022 in an effort to slow inflation. Since then, the Fed raised its rate from near-zero to 5.25%, boosting it to its highest level since 2001 at its most recent meeting in July. When the Fed raises its interest rate, businesses must pay higher rates on any floating-interest debt they have, and on any debt they refinance. Ultimately, workers feel the effects.

“A rise in corporate interest rates will squeeze firms’ profits and ultimateಞly may render firms less able to borrow, invest, and hire (or retain) workers,” the resear🦄chers, Falk Bräuning, Gustavo Joaquim, and Hillary Stein, wrote.

In worst-case scenarios, that can lead to financial distress and companies defaulting on loans. And if history is any guide, the vast majority of the impact of the Fed’s rate hikes have yet to be felt.

“With respect to the current cycle, this finding suggests that most of the interest rate increases still have not fully fed into firms’ interest expenses,” the researchers wrote. “The initial rate increase of 0.25 percentage point in March 2022 may have fully passed through into the corporate interest expense ratio, but firms have yet to see the full impact of the subsequent 5 percentage points of rate increases.”

That’s a contrast to other parts of the economy, such as the 澳洲幸运5官方开奖结果体彩网:housing market and the 澳洲幸运5官方开奖结果体彩网:banking system, where high interest rates have already had an impact.

The Boston Fed’s research highlights the uncertainty and threats hanging over the economy as the Fed tries to 澳洲幸运5官方开奖结果体彩网:engineer a “soft landing” from the high inflation that took hold in 2021.