"In the wake of the pandemic, however, three forces interest rates, inflation, and supply-chain volatility have collided and created a strategic crucible. What makes 2025 different is that each element directly amplifies the other two. Higher policy rates raise financing expenses for inventory, persistent inflation complicates pricing decisions, and still-fragile logistics networks mean executives cannot simply "buy ahead" or "run lean" with total confidence."
"Since early 2022, central banks from Washington to Wellington have switched from stimulus to restraint, reflecting a broader trend in global interest rates . By August 2025, the U.S. Federal Reserve's target range sits at , with the upper bound at 4.50% the highest level in eighteen years. This matters because most corporate revolvers, equipment lines, and asset-based loans float off short-term benchmarks."
"Short-term effects are straightforward: companies with variable-rate debt feel an immediate squeeze on interest expense, while asset valuations that depend on discounted cash flows face downward pressure. Longer term, lenders become choosier. Banks are trimming commitment sizes, tightening covenants, and requiring more collateral, all of which can slow expansion plans, especially in inventory-heavy sectors like consumer electronics, building materials, and retail."
Three macro forces—higher interest rates, persistent inflation, and supply‑chain volatility—interact and amplify each other, intensifying pressure on margins and cash flow. Higher policy rates increase financing costs for inventory and raise interest expenses for variable‑rate debt. Persistent inflation complicates pricing and keeps core inflation above pre‑pandemic norms in many G20 economies. Fragile logistics networks prevent confident strategies to "buy ahead" or "run lean." Lenders have become choosier, trimming commitments, tightening covenants, and demanding more collateral, slowing expansion in inventory‑heavy sectors. Surplus cash now earns meaningful returns via Treasury bills and high‑grade commercial paper above 4%.
Read at London Business News | Londonlovesbusiness.com
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