Fed’s Higher-for-Longer Stance Hits Firms That Expected Rate Cut

American businesses and consumers started the year thinking interest rates would finally come down, making big plans to buy equipment or a house. Now all of that is on hold, slowing large swaths of the economy for the foreseeable future.

In Michigan, a maker of cutting tools has delayed as much as $1 million in spending this year on new equipment. In Atlanta, a woodworking machine maker says some customers are trying to extend the life of an apparatus.

When progress on inflation stalled early this year and Federal Reserve officials decided to keep rates at a 23-year high for longer, it forced companies to rethink investments in capital expenditures, inventory and hiring. On Wednesday, policymakers are expected to keep borrowing costs steady again after their two-day policy meeting in Washington.

For businesses, the pain is showing up in data. S&P Global Market Intelligence projects capital investments in manufacturing will rise by only 3.9% this year, down from a January estimate of 6.7%. US business bankruptcy filings increased by more than 40% during the past year through the end of March, while personal filings rose 15%, according to the Administrative Office of the US Courts.

cooling prospects