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Small business owners are feeling the brunt of these changes. For instance, Liz Field, proprietor of the Cheesecakery, has seen her loan payments linked to the rising prime rate surge from $2,400 to $4,120 per month. This drastic increase has led to asset liquidation and reduced employee hours in a bid to balance the books. Goldman Sachs analysts are projecting that small businesses’ interest payments could rise to approximately 7% of revenues next year due to these monetary policy adjustments.
The agriculture sector is also under strain as it contends with falling commodity prices alongside high-interest rates. The combination of these factors is posing a significant challenge for farmers and agricultural businesses, who often rely on loans for operational expenses and expansion.
In the housing market, high borrowing costs are suppressing sales despite a robust job market that would typically stimulate housing demand. The Federal Reserve’s aggressive campaign of interest rate hikes appears to be dampening potential homeowners’ ability or willingness to take on mortgage debt.
These developments underscore the broad impacts of monetary policy changes on different sectors of the economy. As interest rates continue to rise, all eyes will be on how these sectors adapt and what measures they might take to mitigate the effects of higher borrowing costs.
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