Although corporate firms are not immune from the effects of macroeconomic
variables, a basic understanding of these can help financial managers make
informed decisions. One of the most important factors that will influence the
decisions that a corporate financial manager should make is the interest rate.
Interest is a type of macroeconomic variable that affects the price that a
company pays for its use. It is determined by the supply and demand curves
for money.
In March of 2022, the Federal Reserve started to raise interest rates. Since
then, they have gradually increased the rates. This has been a significant
change from the policies of the past few years. Some investors are concerned
that the economy may get hit by a recession due to the increasing interest rates.
After the pandemic, many of the problems that emerged were considered
temporary and would eventually be resolved. However, the Federal Reserve
noted that the shortages of various products, such as cars, were still persisting.
