Strategic Planning For Interest Rates

July 31, 2025

Notably, two board governors dissented with the vote, favoring an immediate cut to rates. The July meeting marked the first dissenting vote since 2020, and the first time more than one governor has dissented in a vote since 1993. The dissenting opinions are indicative of the complex situation faced by the central bank; cutting rates too soon may reignite higher inflation, while keeping rates too high for too long can increase the risks of recession and higher unemployment. Recent inflation readings have shown modest price pressures, with uncertainty from tariffs still weighing on future readings as the U.S. continues to finalize trade deals. Second quarter gross domestic product growth beat expectations, growing 3%, but businesses exercised caution in spending.

Given the uncertainty, Fed Chair Jerome Powell emphasized that no decisions have been made regarding the September meeting, which will depend on incoming data on growth, labor markets, and price pressures.

Key Takeaways and Strategic Planning Considerations

In the near term, a consistent target range by the Fed is more indicative of predictable rates on personal and business loans. While there are other driving forces impacting the ultimate rates that businesses pay, the Fed’s decision is unlikely to materially move the rates on new fixed-rate debt and existing variable-rate debt. Stability in short-term rates should also reduce uncertainty in near-term forecasting.

As the Fed neither indicated or ruled-out the possibility of a rate cut in September, businesses should weigh the risk of rate changes in their financing decisions. If the FOMC votes to lower rates in September, debt instruments obtained now could be at a comparatively higher rate than if the financing was deferred. Conversely, a rate cut increases the risk of higher inflation, which could result in higher costs for financed purchases made in the future.

Making informed decisions on financing and investment activities often involves performing multiple different scenario analyses to identify the best option for your business. Stradiot Consulting & Advisory can work with your business to identify risks and model outcomes, allowing you to make these critical decisions with confidence.

This article is for informational purposes only and should not be relied upon as financial, investment, tax, or business advice. If you would like personalized guidance and support, please contact us.