Dallas Fed President Robert Kaplan warned in a speech that in the even of an economic downturn, level, growth and credit quality of corporate debt could “contribute to a deterioration in financial conditions which could, in turn, amplify the severity of a growth slowdown in the U.S. economy.” Thus, vigilance is warranted and Fed will continue to monitor corporate debt.
Meanwhile, he is “also sensitive to these corporate debt developments in light of the historically high level of U.S. government debt and the forward estimates for the path of government debt to GDP. An elevated level of corporate debt, along with the high level of U.S. government debt, is likely to mean that the U.S. economy is much more interest rate sensitive than it has been historically.”
