Interest Rate Cuts And What Finance Leaders Need To Know #CashNews.co

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After years of waiting, it’s happening soon: Interest rate cuts are just about guaranteed.

Months of slowly abating inflation—buoyed by unemployment figures creeping up in the recent past—helped Federal Reserve policymakers move closer to the decision to reduce interest rateswhich have held steady at a 22-year high of 5.25% to 5.5% since July 2023. Minutes from the previous Federal Open Market Committee last month indicate the “vast majority” of members felt conditions would be right for a rate cut in September. Federal Reserve Chair Jerome Powell said Friday at the Fed’s annual symposium Jackson Hole, Wyoming, that “the time has come for policy to adjust.”

Markets rallied following Powell’s speechwith the Dow Jones Industrial Average closing at a record 41,240.52 on Monday. According to the CME FedWatch tracker, more than two-thirds of economists expect rates to be cut to 5% to 5.25% next month.

It’s not just the positive news of inflation slowing down that moves the Fed closer to cutting rates. Job numbers have been trending downwardleading to a brief market panic earlier this month. Last week, the Bureau of Labor Statistics revised its job numbers downward, saying the U.S. added 818,000 fewer jobs than estimated from March 2023 to March 2024. Economists and markets largely expected this revision, and Powell said last week that the Fed would do everything it could to support a strong labor market with its policy decisions.

However, there are more than three weeks between now and the next Fed meeting, and more may change the economic picture. New labor, inflationary and GDP figures are scheduled to be released. The stock market will continue to shift and contract based on business events and earnings reports. And the presidential campaign—and candidates’ policy proposals and actions—can alter the direction of economic sentiment. A rate cut may be much more likely now, but it still hasn’t come just yet.

NOTABLE EARNINGS

• Fast casual Mediterranean restaurant chain Cava continued its hot streak since debuting on the markets last summer, with shares increasing 20% on Friday alone. In Cava’s most recent earnings, reporting after markets closed on Thursday, the restaurant chain beat sales and profits estimates and raised its full-year forecasts. Since its IPO, the chain’s stock price has surged more than 400%, and some analysts are saying its niche and “digital advantage” give it more room for growth.
• Peloton reported year-over-year revenue growth for the first time in two years last Thursday, boosting the at-home exercise company’s shares by 36% in a single day. It was the largest single-day percentage growth Peloton has seen since its IPO in 2019, but its market cap is still far below its pandemic-era high. The company has seen highs and lows recently, cutting about 15% of its staff in May to help the company reduce annual spending by more than $200 million by the end of the 2025 fiscal year. Former CEO Barry McCarthy stepped down as the cost-cutting initiative was announced, and the company is still looking for a permanent leader.

LEGAL ISSUES

A federal judge in Texas struck down the Biden Administration’s new rule banning noncompete agreements last week. Forbes’ Kelly Phillips Erb writes U.S. District Judge Ada Brown found the rule to be “arbitrary and capricious,” and that it exceeded the statutory authority of the Federal Trade Commission. The rule, issued in April, was intended to bar employers from restricting where employees could work next, calling it an unfair practice that harmed workers. It was challenged by global tax services and software provider Ryan, which argued the noncompete ban would burden companies trying to both protect their intellectual property and retain employees. The FTC said it is considering an appeal.

ON THE CAMPAIGN TRAIL

As presidential candidates Donald Trump and Kamala Harris unwind their policy proposals, economists are examining how they may impact businesses going forward. Few details have been shared of how these proposals could be enacted, so there are many uncertainties.

Trump, who increased tariffs on a wide variety of imported goods during his first term as president, has proposed raising tariffs more if elected to a second term as a form of punishment for countries that are “ripping us off and stealing our jobs.” Forbes’ Alison Durkee writes many economists say these kinds of tariffs will increase prices, both for businesses and consumers, which would ultimately end up paying for them. They also could result in job losses, economists from Moody’s said.

Harris has said she plans to take action against corporate grocery price gouginggiving more power to state attorneys general and the Federal Trade Commission to investigate and fine businesses engaged in these practices, writes Forbes senior contributor Jack Kelly. She also intends to prevent mergers that could lead to higher food prices. (A federal court in Oregon is hearing an FTC case challenging the proposed merger between grocery giants Kroger and Albertsons this week.) It’s unclear how this proposal will be enacted, but grocery stores tend to have profit margins of between 1% to 3%—and their profits have recently fallen to pre-pandemic levels, with just 13% expecting growth this year, according to a recent survey from the Food Industry Association reported by Grocery Dive.

NOTABLE NEWS

Apple CFO Luca Maestri will transition out of the role on Jan. 1, and will be succeeded by Kevan Parekh, the current vice president of financial planning and analysis. Parekh is an 11-year Apple veteran working with financial planning and analysis, investor relations and market research. He previously led worldwide sales, retail and marketing finance, and led financial support of product marketing, internet sales and services and engineering teams. Maestri will remain at Apple, leading the corporate services teams—including information systems and technology, information security, and real estate and development—reporting to CEO Tim Cook.

DEEP DIVE

UAW President Shawn Fain Shows The Union’s New Power

United Auto Workers President Shawn Fain has not been far from the news in the last year. Last fall, he led union members at Ford, Stellantis and General Motors in a six-week strike that helped them secure lucrative contracts with raises and benefits. Then the UAW began a membership drive at other automakers, so far spreading to a Volkswagen plant in Chattanooga, Tennessee.

This month has been a huge one for Fainwrites Forbes senior contributor Ed Garsten. Fain gave a prime-time speech at the DNC Convention last week. The UAW filed federal labor charges against Tesla CEO Elon Musk and presidential candidate Donald Trump for comments on a live-streamed interview on X that the union said were “attempting to intimidate and threaten workers.” The union is preparing for another potential strike against Stellantis, which had committed to building a new battery plant and reopening a plant in Belvidere, Illinois, as part of its contract last year. Union officials say Stellantis is reneging on its agreement, while Stellantis said market conditions have caused it to delay the plant’s reopening.

While organized labor had lost its overall power and influence in recent decades, Harley Shaiken, a labor expert and professor emeritus at the University of California-Berkeley, told Garsten that Fain is showing its resurgence. This has implications for both companies, but it can also impact what happens in the presidential election.

“In all his talks, he doesn’t focus on UAW members,” Shaiken told Garsten. “He focuses on the working class, meaning the gains that are won in Detroit can be felt in Minnesota, New York and elsewhere, and that we haven’t seen in a while. And that sense of inspired and engaged rank-and-file UAW members—as well as workers more generally—is pivotal in any election, but in a close election, it could prove decisive.”

FACTS + COMMENTS

China’s PDD Holdings, parent of U.S. e-commerce marketplace Temu, saw its stock fall almost 30% on Monday after disappointing quarterly revenues.

97.06 billion yuan: PDD Holdings’ sales in the last quarter, down from expectations of 100.17 billion yuan

156%: Year-over-year operating profit increase for the company

‘We are prepared to accept short-term sacrifices and potential decline in profitability’: Co-CEO Lei Chen said about the company’s commitment to improving trust, safety and merchandise quality

STRATEGIES + ADVICE

Since interest rate cuts are likely in the near future, it may be time for your business to borrow money. Here are 5 things you should prepare.

Business is more global today than ever, and companies of all sizes are working with international partners. Here are 5 ways to improve your communication with them.

QUIZ

A recent report in The Verge indicated X owner Elon Musk has instituted a new requirement for employee stock options. What is it?

A. A loyalty test

B. A self-assessment detailing contributions to the company

C. Deleting accounts on other social media platforms

D. Signing an anti-DEI petition

See if you got the answer right here.