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