By Andrew Miller
As expected, the Federal Reserve kept rates unchanged during Wednesday’s announcement. Interest rates will continue to stay between 3.5% to 3.75% for the fifth consecutive meeting.
However, not everything went according to plan.
The decision to hold wasn’t unanimous. In fact, Fed Chairman Kevin Warsh called it a “good family fight.”
Three sitting regional Fed presidents, Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari, and Dallas’s Lorie Logan, voted in favor of a quarter-point rate increase instead of a hold. In their view, holding steady does nothing to move the Fed closer to their 2% target for inflation.
If Warsh has a plan to meet that target, he hasn’t provided any hints. He’s been very vocal about keeping forecasting under wraps from the market.
But the market doesn’t like uncertainty. The 30-year Treasury yield climbed to its highest level since 2007.
That’s a bigger deal for small business owners than it sounds.
Long-term financing, from SBA 504 loans to commercial real estate, tracks Treasury yields more closely than the fed funds rate itself. When that yield rises, fixed borrowing costs can rise with it, even without the Fed lifting a finger.
That covers fixed-rate exposure. For variable-rate debt, the number to watch is the WSJ Prime Rate. That’s what most business lines of credit and SBA 7(a) loans are priced against. It’s been parked at 6.75% since May. Wednesday’s hold keeps it there.
The real risk starts with the next meeting on September 15-16. If Hammack, Kashkari, or Logan pick up even one more vote for a hike, the prime rate could move up, alongside every variable-rate loan tied to it.
That’s worth factoring into any financing decision built around the assumption that borrowing gets cheaper before year-end. Right now, there’s no evidence for that. If anything, the Fed split provides slightly more evidence against it.
P.S. Prime rate, SBA rates, Treasury yields… It’s a lot to track on your own. That’s exactly the kind of thing Signet helps business owners make sense of before they sign on a loan. Let’s talk about your funding.