Insights
Deal Team M&A Insights Through Mid-2024
Read MoreIt was a good news/bad news situation last week. On the one hand, inflation is cooling (hurrah!) with consumer pricing rising at a rate of just 0.2% from April to May (previously rising at 0.3% rate in the prior month). But Federal Reserve Chair Jerome Powell also announced that benchmark interest rates would remain steady at 5.25%-5.50%, a 23-year high (boo-hiss!). He left the door open to revisiting policy sometime in the fall or late as December. Guess we can’t win them all.
Titrating Behind the Curtain
You might picture a team of wizards behind the Fed curtain. The committee adds precise ingredients and tonics to the bubbling cauldron of our economy, trying to titrate toward the perfect balance of maximum employment and stable prices. The twin outcomes of 2% inflation and low unemployment are the mandate; Powell indicated a desire to see more progress on inflationary pressures which were at a 40-year high coming out of the pandemic.
For now, the business community is sipping some bitter medicine from that cauldron. High costs of borrowing, deleveraging debt, investment and expansion decisions on ice, and compressed margins, all add up to the need to carefully manage debt, adjust investment plans, and optimize operations. Hang in there. Even insiders declared this week that there’s cause for optimism.
“We’ve got a good strong labor market. We think we’ve been making progress toward the price stability goal. We’re asking...is our policy stance about right? And we think yes, it’s about right.” – Jerome Powell, U.S. Federal Reserve Chair
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