Last week, the Fed cut rates amid competing concerns. On the one hand, businesses are experiencing a slowdown in hiring and a rise in unemployment. On the other, there are those who feel the fight against inflation hasn't been won yet—and that the cut may have been too aggressive. While the news reported by Reuters alludes to the rarity of soft landings, I remain cautiously optimistic that the Fed feels confident it can control inflation while supporting an economy that has largely managed to avoid a recession.
Where CFOs should focus
With the current and expected further easing, CFOs can expect debt refinancing opportunities, calls for accelerated capital investment, and a more favorable environment for mergers and acquisitions. Private equity deals—which are already up over the prior year—should see a further uptick.
Trends in the talent pool
Unfortunately, one area where the rate cuts won't help is the supply of seasoned finance and accounting talent. Due to secular trends, unemployment rates for these professionals are less than half the overall average and competition for skilled professionals remains high. CFOs will need to continue to be aggressive in the war for new talent while simultaneously making investments to upgrade the data analytics skills and technology savvy of their staff.
While never easy, the role of the CFO in navigating ongoing economic volatility, the war for talent, and technology-driven change is as indispensable as ever.
SOFTENING THE LANDING
The Fed's aggressive rate hikes, begun only after
inflation had surged, were initially expected to cause an economic
slowdown resulting in job losses. Instead, the economy so far has
averted recession, even as inflation by the Consumer Price Index
dropped to 2.5% from a mid-2022 peak over 9%. Employers kept
hiring, and the unemployment rate, even with its recent rise to
4.2%, is still low by historical standards. In cutting rates, the
Fed is trying to keep it like that.
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