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The midterms won’t ease borrowing costs. Here’s what CFOs should do now
Democrats win control of both chambers of Congress, and EY-Parthenon advisers warn CFOs to expect sustained higher borrowing costs.
Key points
- EY-Parthenon's Josh Putnam says CFOs should go into 2027 expecting sustained higher borrowing costs.
- Gregory Daco says a divided government would not automatically push term premiums higher.
- Mark Williams advises companies relying on commercial paper to consider longer-term funding and diversify sources.
Why it matters. Political gridlock and fiscal uncertainty could raise short-term and long-term borrowing costs, forcing finance chiefs to stress-test investments and secure credit lines.
Democrats won control of both chambers of Congress in the U.S. midterm elections, and EY-Parthenon's Josh Putnam told the author that CFOs should expect sustained higher borrowing costs into 2027. Putnam cited growing deficits, strong capital demand, inflation volatility and policy uncertainty as pressure on long-term rates. Gregory Daco, EY-Parthenon's chief economist, said a divided government "would not automatically push term premiums higher" but that repeated budget fights would reinforce upward pressure.
Latest updates
The midterms won’t ease borrowing costs. Here’s what CFOs should do now
A former Fed bank examiner and two EY-Parthenon leaders explain how to stress-test investments, shore up liquidity and rethink AI spending. Good morning. What do the U.S. midterm election results mean for finance leaders? With Democrats winning control of both chambers of Congress, companies could face greater scrutiny of issues such as AI investment and data center development. But the broader financing challenges facing finance chiefs extend beyond the shifting political landscape. “CFOs should go into 2027 expecting sustained higher borrowing costs,” Josh Putnam, EY-Parthenon’s global and Americas corporate finance leader, told me. Financing conditions are also likely to remain volatile, regardless of which party controls Congress. Growing deficits, strong capital demand, inflation volatility, and policy uncertainty are putting pressure on long-term rates, Putnam said, making disciplined capital allocation, debt management, and investment decisions increasingly important for finance chiefs. His advice is to stress-test investment hurdles, evaluate debt maturities, and protect balance-sheet flexibility. Companies must understand which investments can generate returns above their cost of capital and redirect resources when they cannot, he said. Planning for fiscal uncertainty Political gridlock could add risk, but on its own it does not necessarily mean higher long-term borrow.