Thursday, September 21, 2006

Interest Rates - What's the Impact?

Last night, I attended a meeting for the networking group PNG to which I belong. This month's discussion topic was the impact on our respective clients of the Federal Reserve's decision not to raise interest rates.

In attendance were approximately twenty professionals who all serve small and middle market businesses in the manufacturing and distribution sectors. My fellow attendees work for investment and commercial banks, insurance brokers, marketing consultants and operations consultants to name a few. Each works closely with top level executives at their clients.

Surprisingly, most, though not all, believed that rising interest rates were not having a significant impact on their customers relative to engaging their services. A few of the consultants were seeing increased requests from clients to help them become more efficient, but didn't attribute this surge to interest rates. The insurance brokers were mixed on how the general rise in interest rates were impacting premiums and guaranteed returns offered on certain policies. The money guys, myself included, claimed the rise in interest rates has not decreased the amount of money chasing deals, but transactions are being funded by different sources than six months ago as chief credit officers are adjusting their appetites for perceived increases in risk.

CFO Magazine noted today that optimism levels of CFOs are at a 5 year low due to concerns about weak consumer demand. Worried about the U.S. economy and that a recession is imminent, these CFOs also singled out labor costs and interest rates as two of their top concerns.

How are interest rates impacting your business? Let me know.

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