Fed Lowered Interest Rates, But Has Inflation Been Beaten?
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Now that the Federal Reserve has lowered interest rates for the first time since the pandemic, that must mean inflation has been tamed, right? After all, the Fed staunchly maintained decade-high rates to combat stubborn inflation in their goal to hit 2%. However, inflation has not technically reached 2% yet, and consumers and business owners alike are feeling the effects.
The latest Consumer Price Index reveals that prices continued to rise 2.5% over the last twelve months. This is still not quite the 2% target the Fed aimed for, and yet, interest rates were slashed at last week’s meeting. Many speculate that this move was related to the economic concerns plaguing Amercians the past few months. First, the Sahm rule was triggered when unemployment rose in the summer. Then, the US Treasury Yield began normalizing, which can happen right before a recession hits. As a result, panic set in the markets, sending Wall Street plummeting briefly before recovering just ahead of the rate cut.
Despite the 0.5% rate cut supposedly meant to balance the American economy after the rocky year, the Fed admits it may not help much. Inflation continues to make the country struggle. Even if prices are no longer climbing at an extraordinary pace, they are still at the peak left behind. Even Fed Chair Jerome Powell has said that Americans will continue “‘experiencing high prices, as opposed to high inflation’”. This puts a strain on the finances of both consumers and business owners. For businesses especially, the aftereffects of inflation can severely impact cash flow.
Well what can business owners do? Prices aren’t likely to come down, but the pace at which they rise has slowed significantly. This is the moment for businesses to assess their cash flow and take appropriate actions. If cash is tight, it may be time to take advantage of lower interest rates. Still, you shouldn’t make decisions without an experienced financial advisor to guide you. Get the right guidance with XQ CPA’s team of professionals by your side. Use the link below to schedule a consultation today.
Phone: 832-295-3353
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