Fed. Interest rates can hurt small business growth

SALISBURY, Md- Despite a long-awaited rate cut, the Federal Reserve has decided to maintain current interest rates at 7.9%, citing its inability to achieve its target of sub-2 percent inflation in the US.

In Wicomico County, Salisbury Chamber of Commerce President Bill Chambers tells WMDT the news comes at a difficult time, with many businesses seeking bridge loans and lines of credit to expand workforces for the area’s many seasonal businesses.

He tells us that the hospitality, restaurant and entertainment sector could be hit hard, setting up another tough few years of declining spending due to that inflation.

“This certainly presents challenges in terms of cash flow, and it makes it quite difficult to meet their financial obligations, and that is payroll taxes, insurance, the things that businesses have to pay, and these higher interest rates are unfortunately in a bad timing,” Chambers said.

He says the short-term rental market in vacation destinations, including Ocean City, could also be affected because apartment rentals have a 30-year fixed interest rate of the same 7.9%. He tells us that with interest rates remaining the same, refinancing is also out of the picture for small-scale landlords who could lose money on that secondary income.

Chambers hopes the Fed will change its target from 2 percent annual interest to 3 percent, saying the longer rates stay high, the less consumers spend and the more businesses suffer.