By Andrew Miller
On Wednesday, new Fed chair Kevin Warsh held his first press conference. The Federal Reserve is keeping interest rates steady at a range of 3.5% to 3.75%. For now.
After the rate-setting committee oversaw a unanimous vote to hold, they promptly signaled that the next move might be up. Updated projections from committee members now show a quarter-point hike expected before year-end.
Three months ago, those same members were projecting a cut. That’s a full reversal.
So, what’s changed?
“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East,” per the Federal Reserve’s statement on the decision.
“Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
That’s the good news. The complication is inflation, which is at its highest level in three years. Core inflation, which strips out food and energy, is still expected to run at 2.5% through next year.
The Fed can’t fix a war with interest rate policy, but it can prevent an energy shock from spreading into broader price increases. Delivering price stability is exactly what Warsh said the committee is committed to doing.
In a notable break from how the Fed has operated, he also declined to submit his own rate forecast. It’s a deliberate signal that he’s skeptical of the kind of forward guidance his predecessors leaned on heavily. Wednesday’s announcement was short. No hints on where rates are headed.
As for business owners, there’s no sense holding off raising capital in the hopes rates would drop. That thesis just died. Cuts are unlikely. A hike might be coming.
This isn’t a call to panic. It’s a call to review. Look at what you’re carrying, what’s variable versus fixed, and whether there’s a financing move worth making now before conditions get less favorable.
P.S. The Fed isn’t cutting. Signet can still get your business funded in as little as 24 hours.Let’s talk.