Implications of the Fed's Interest Rate Cut for Manufacturers

Federal Reserve Chair Jerome Powell has announced a 50-basis point cut to the target rate, lowering the federal funds rate to a range of 4.75% to 5%. This announcement comes shortly after IMTS 2024, the largest manufacturing trade show in the Western Hemisphere, where manufacturers expressed strong enthusiasm for the innovative technologies showcased to meet future consumer and business needs.

“Economic convention says this decrease will help spur additional consumer purchasing and business investment. Fulfilling this additional demand will require the parts and products that are made with the metalworking machinery AMT members provide,” said Christopher Chidzik, principal economist of AMT – The Association for Manufacturing Technology.

“A gradual normalization of interest rates would have been a welcome signal the Fed has squeezed inflationary pressures from the economy without tipping it into recession. With this larger cut, Chair Powell has also recognized some growing risks of rising unemployment. While that may cause some to entrench their hesitation into future planning, the forward guidance shows unemployment deviating little from the longer-term trend. If consumers and businesses take those signals from the Fed and translate them into additional spending and investment in the remainder of 2024, demand for manufacturing technology will surely begin to increase for the rest of the year and remain elevated through 2025.”