Is the Rate Cut Making a Difference?
The Wall Street Journal finds evidence that the Fed’s rate cut has already jolted small businesses into spending more.
Good Morning!
Here are today’s highlights:
The latest trend in restaurant marketing? Sketch comedy.
The battle between co-founders of a tennis magazine offers a reminder to choose your partner carefully.
A year later, the end of child-care funding doesn’t seem to be the disaster many predicted.
The new, more conservative government in France is raising taxes on businesses.
FINANCE
For some small businesses, the Fed’s rate cut has already made a difference: “A tire seller will open more stores. A maker of gun safes plans to boost advertising. A candle maker is looking at taking out a $20,000 loan to expand for the holidays. Some small-business owners have begun to recalibrate their spending and investment plans in response to the Federal Reserve’s decision to cut interest rates by half a percentage point. For Rental Concepts, based in Springdale, Ark., the rate cut announced last week—and the promise of more to come—were enough to jump-start plans to add as many as three new tire and wheel store locations next year.”
“The average interest rate on short-term, small-business loans stood at 9.5 percent in August, according to the National Federation of Independent Business, up from a recent low of 4.1 percent in July 2020, before the Fed began hiking rates to stem inflation.”
“Roughly one in four small-business owners said a half-percentage-point reduction in rates would be sizable enough to affect their business, according to a survey of more than 770 entrepreneurs conducted by Vistage Worldwide in early September. The survey by the business-coaching and peer-advisory firm was completed the day before the Fed announced the cut.”
“Other entrepreneurs said it would take months—and additional cuts—for lower rates to translate into higher sales or additional borrowing. Thirty-one percent of those surveyed said interest rates would have to drop by a full percentage point for them to see any impact, according to Vistage, while 27 percent said rate cuts would have no impact, regardless of the amount.”
“Some small-business owners expect lower rates to boost consumer confidence and, with it, demand. ‘There is a subtle optimism that starts growing when rates are coming down,’ said Tom Kubiniec, chief executive of SecureIt Tactical, which makes gun safes for consumers and weapons-storage systems for the military. ‘When rates are going up, it’s just the opposite.’” READ MORE
