Typically, the Fed only cuts rates amid clear signs that the economy is struggling. It is a way to boost consumer spending and empower the economy. According to The Washington Post, Federal Open Market Committee members are calling the late July cut an “insurance cut” to protect against economic implications fueled by global trade turmoil. It noted unemployment is at a 50-year low at 3.7 percent, the economy is strong and humming along at a pace of more than 2 percent and the stock market is enjoying new highs.
During the month of June, the U.S. economy experienced strong growth with retail sales rising by 0.4 percent, better than the 0.1 percent anticipated growth, and manufacturing output increasing by 0.4 percent, according to the Wall Street Journal. At the same time, consumer spending in the second quarter was at its highest since 2014, reporting a 4.3 percent annual rate. This, in addition to the positive job numbers and strength of the stock market, position the economy on a positive trajectory.
At an economic forum held earlier this year sponsored by Firstrust Bank, Joseph H. Davis, Ph.D, the Global Chief Economist for Vanguard, mirrored many economic pundits across the U.S. by saying the current political climate would make for a year of growth checked by periodic volatility. This has proven to be the case.
Specifically, Davis said he expected a great deal of fluctuation in the markets through the 2019 calendar year, but barring unforeseen circumstances, growth would continue.
So, what does all this mean for small business owners looking at the second half of 2019 and beyond?
Experts see the rate cut and strength of the labor markets as signs of progress. A rate cut can be beneficial to small business owners, as they tend to stimulate lending with reduced borrowing costs and economic growth. In light of these positive economic indicators, many business owners will likely move ahead with their own plans for building expansion, acquisition or sale, equipment financing or whatever the business demands—if the time is right.
But as always, remain cautious. Keep in mind each business is unique and managing growth can be challenging without consulting advisors with specialized expertise, such as your lawyer, accountant or business banking specialist.