Amid interest rate speculation, U.S. businesses see sustainable growth

Dan Wilson
Posted by Dan Wilson
Commercial Banking

Over the past six years, the short-term interest rate environment in the U.S. has been very stable, which was one of the Federal Reserve’s goals when it started its Quantitative Easing (QE) program in 2008. For U.S. companies, stable short-term interest rates have contributed to predictable cash flows, creating a secure foundation for decision-making, planning and capital investment.

Crane silhouetted against a reddish sky, rising above an office building that is under construction.Companies across the U.S. continue to capitalize on this stable backdrop, investing in everything from new machinery and equipment to new office space, retail locations and distribution and warehouse facilities.

Rates would rise because of strong, sustainable growth

While many economists, including Bank of the West Chief Economist Scott Anderson, expect the Fed to embark on its first rate hike around June of 2015, others are more concerned about deflationary pressures. Given the competing forces at play, it is difficult to predict whether rates will rise in the near future. If they do, they would only be raised because U.S. economic growth is strong and sustainable enough to warrant it.

In fact, Scott’s recent report on deflation and the U.S. economy offers a good analysis of some of the important factors currently at play.

The businesses we serve at Bank of the West are aware of the possibility of rates rising in the coming months, but don’t consider it as a major concern impacting their investment plans, given today’s ideal setting for capital investment and reinvestment in business lines.

U.S. market offers stability

The current international economic landscape is only reinforcing the relative appeal of the United States. Consumption in Europe is weak, and Asia is facing a number of challenges, including questions about a potential slowdown in Chinese growth.

There’s a common theme emerging in light of this: Companies are looking to expand to the United States because it is a market that offers stability. As a result, there are substantial capital inflows. As the U.S. economic recovery gathers steam and discretionary consumer spending increases, we expect businesses to keep benefiting from an environment that encourages investment and growth.

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