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It feels like forever since the U.S. Federal Reserve made a long-awaited cut to its key lending rate, but it’s only been two weeks! The cut was announced on Wednesday, September 18, yet between then and now Hurricane Helene, the U.S. Vice Presidential Debate, and escalating tension in the Middle East have pushed economic news off the front page.
Nevertheless, the lending rate cut was the first made since the COVID pandemic, and has been long-awaited by industry. The cut itself was a half a percentage-point, which was larger than the ¼ point cut expected by many. However, the size of the cut was less important than the message sent by the cut, that inflation in the U.S. has slowed and is trending toward the long-term 2% rate preferred by the Fed
Perhaps the most interesting part of the Fed’s strategy was that Federal Reserve Chairman Jerome Powell signaled additional planned interest rate cuts – another half percentage-point before the end of this year, plus an additional full percentage point of cuts in 2025. These planned cuts seem to have held industry back from making any sudden moves on long-delayed CapEx spending, at least over the past two weeks.
I reached out to some maintenance and reliability thought leaders for their take on how they think the Fed’s decisions will impact both our industry and manufacturing in general.
Klaus Blache, Director of Reliability & Maintainability Center, University of Tennessee – Knoxville: “The interest rate cut will help supply chains, construction and manufacturing some. But, for many companies, I think it’s a “wait and see what happens next”. It’s always a balance of inflation and high costs versus less business and more layoffs. The average household benefit will be small, because prices aren’t going to go down. The focus appears to be labor now, but it’s manufacturing jobs that are needed to sustain wealth, not just the growing number of service jobs.”
Corey Dickens, Senior Solutions Consultant, Brightly: I don’t see much tangible impact to M&R functions, not until the election that is. This is a good sign, but I see it being used to ensure the accounting looks good before end of the year for reporting. In any other year maybe this would drive some key decisions, yet with this year aligning with major election implications, I don’t think anything will be felt by the shop floor, yet.
Kevin Clark, VP Time Series AI, Falkonry: "Personally, I don’t think the impact will do much, at least until they lower it again. If there is an impact, the market probably won't see it until next year. (There's) too much uncertainty to trust this positively."
For additional reporting and comment by industry on this story, see Manufacturers Cheer Large Interest Rate Cut by our sibling publication Industry Week.
