The central bank raised its policy rate by nearly 400 basis points to rein in inflation this year. As a result, borrowing costs have increased significantly, bumping companies' average cost of capital from their lowest levels in 2021.
This year, the stock market plunged into the bear market as the breakneck hike in interest rates evaporated demand for risk-sensitive assets. While the central bank has lowered the magnitude of the increase this month and has indicated smaller raises over the coming months, it has hinted that the terminal rate could rise to more than 5% in 2023.
