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European credit insurer Euler Hermes projects that U.S. business bankruptcies will climb about 12% this year, driven by inflation pressures and a economic slowdown. Automotive suppliers and companies connected to the housing market, from building materials outfits to furniture companies, are particularly vulnerable, said Dan North, chief economist for the Paris company’s American subsidiary Euler Hermes ACI in Owings Mills, Md. “Anything involved in housing is under significant pressure,” North said. Although abundant financing has kept struggling companies afloat for the past few years, many these companies will be candidates for bankruptcy going forward, North said. “When economic times deteriorate, those companies which are the weakest companies are the first to fail,” North said. The U.S. Federal Reserve’s boost of the federal funds rate, which is the interest rate a bank can charge other banks for short-term cash loans of Federal Reserve funds, is also a factor, North said. The federal funds rate, climbed from 5% to 5.25% percent last June. Such economic policy shifts “takes a year or more to be felt,” North said. “This tightening [of the monetary supply], which is already dragging on the economy, is going to continue to do so,” North said.

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