The FED December Rate Cut

The big economic news this week came out of the FED, where they conducted their December meeting and decided on slashing interest rates by a further 25 basis points, albeit facing much internal dissention. The decision was indeed debated and not taken lightly by the Federal Reserve Board, conflating data the primary source of debate, with inflation in the last month moving up from 2.9% to 3%, yet a weakening jobs market, combined with delayed data or incomplete information due to the recent prolonged government shutdown, one can easily point to a murky outlook on the economy and understand the high amount of disagreeing opinions.

Nevertheless, the rate cut has been approved, taking the benchmark interest rate to 3.5% from its previous 3.75% average level (an aggregate total of 0.75% total interest rate decrease from the beginning of 2025).

With the cost of borrowing decreasing further, consumers will get a bit more breathing room on the already strained credit market due to exorbitant amounts of borrowing seen in recent years. A broadly agreed upon and fairly firm conclusion from economists is that this most recent reduction in interest rates will most likely last for a while. The amount of conflicting economic data and a changing landscape of economic activity, particularly in the energy and technology sectors, have the central banks in wait and see mode until the outlook begins to clear. Speaking to that, many Americans have been holding off on refinancing their debt whether that be consumer based or their mortgages until rates hit a sustained “floor”. With rates at a 3-year low and what economists believe is a stable rate of 3.5% is an ideal environment for movement on refinancing activity to pick up momentum. That coupled with new tax cuts, offering more Americans and corporations with higher rebates could expect a boost in cash among the American consumer, can cause higher economic activity dependent on how Americans choose to deploy said capital, either back in the economy through spending, or used to lower current household liabilities.

As a business owner it is important to keep in touch with the ebbs and flows of the economy, in particular the “buying power” of the consumer. This share of capital each business is competing for every day and your job as the principle to win it over, by getting ahead of trends, patterns and the amount, whether a surplus or deficit, and structuring your marketing strategy around it is essential for longevity and success of your brand.

To gain personalized guidance for your business on this topic and others contact us.

- Vince Calace

Founder - Venture Business Development