Will a “Hawkish” Federal Reserve put more interest costs on your business?

July 7, 2026/Business, Finance/

My routine is pretty normal during the work week. I get up before 6 am, put the coffee on, do my devotions, and then enjoy the coffee for a few minutes while watching the business program “Mornings with Maria (Bartiromo) ” on Fox Business Channel before checking to see that Funeral Director Daily was sent out to subscribers and heading out on my run.

Last week while watching, Bank of America CEO Brian Moynihan was a guest of Bartiromo and I was somewhat surprised to hear that he expects the Federal Reserve Board to raise interest rates at least three times before any rate lowering would take place. If you follow the discussions of President Trump you might find that as a surprise, too. . . especially since Trump just appointed Kevin Warsh as the Federal Reserve Chairman and part of the thought process is that Warsh would seek lower interest rates sooner than former Chairman Jay Powell.

Moynihan believes that Warsh will want to stop inflation from rising more than anything and because of that interest rates will rise. Moynihan contends that “business is good” right now and that Warsh believes he should first stop any price increases on the American consumer to keep it that way. Here’s a print article from Fox Business that explains Moynihan’s thinking. (You can also access Moynihan’s complete interview with Bartiromo from that link.)

What does a potential increase mean for your business? — Right now the Federal Funds “Target Rate” is set at 3.50% to 3.75%. That makes most creditworthy business loans, the prime rate, about 6.75% at this time. I visited with a local small bank executive over the holiday weekend and he told me that that same 6.75% rate is attainable for creditworthy small businesses as well.

If there are three rate increases in the future they could be quarter or half-point raises each time which means that when set the “Target Rate” would probably land somewhere between 4.25% and 5.00%. Given the same 3% margin for banks as is seemingly the spread right now, you could expect your interest rate on adjustable loans to go to as high as 8%. However, as interest rates rise, banks generally get more competitive to obtain loans and the margins compress slightly.

So, let’s say you have a $100,000 adjustable loan for operations or facilities. If so, and the rate goes to 8% instead of 6.75% you will pay only $1,250 more in interest per year. If you have a million dollar loan you are looking at about a $12,500 increase in interest for the year. So, even if those rates go up for a short period of time, I don’t think this would be a major hinderance on your business. . . . if it was only for a short period of time.

It might make more difference to your clientele — Rising interest rates may make more of a difference to your customers than to your own borrowings. If the Fed Fund rates go up it will affect credit cards and other consumer credit options as well. And, especially for credit-stressed families. As rate costs go up for these already stressed consumers, you could find them choosing less options from your business at the time of death . . . .in effect, lowering your sales volumes.

Here’s one reason why I think the Bank of America CEO Brian Moynihan may be right about Federal Funds rates being raised. The following graph indicates the inflation direction of today vs. that of the 1960’s, 70’s, and 80’s. Notice the odd similarity to the direction of inflation back then with our latest bout of such.

This graph comparison extends to 2023 and its comparison with 1975. It shows the movement of 1976 to 1982 and illustrates what could happen if the history repeated itself. In that comparison, America sees higher inflation rates in 2028 than we did in 2022 if history repeats itself. If you have forgotten, inflation reached a peak of 9.1% in June 2022.

So, just something to think about as you make your business plans moving forward. It may be that Fed Chair Warsh will try to raise the Federal Funds rate to combat inflationary prices believing that higher interest rates are simply the price to pay for putting a stop to inflationary costs.

More news from the world of Death Care: