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Did Fed Interest Rate Hike Ignore Small Business?

By Ephrat Livni, Esq. on January 07, 2016 | Last updated on March 21, 2019

The fact that the Federal Reserve Bank raised a key interest rate last month could be considered a positive sign. Is this an indication that the Great Recession really is behind us and that there is economic prosperity ahead?

That would be great news for small businesses. But of course, there are dueling views. An editorial in Fortune warns that the rate hike might just be a sign that the big guys who pushed the market to the brink have recovered, not that there is smooth sailing ahead for small businesses or workers. Let's consider the concerns.

Checking the Metrics

A former Obama staffer and current Harvard Business School senior fellow, Karen Miller, warns in her editorial, "As Wall Street embraces the new normal, the future of the Fed's monetary policies will need new metrics to ensure shared prosperity for America's small businesses and the people they employ."

Miller worries that the Fed looked to the indices that indicate big business is thriving, and based its decisions on that. She suggests that there needs to be more focus on those hit hardest by the recession but points out that meaningful data on small business and its workers is woefully lacking.

Focus for the Future

"There are three key measures of the health of America's small businesses that the Fed should consider as it works to steer the economy forward," Miller writes. They are, small business loan interest rates, small business employment, and the rate of startup activity.

A more accurate measure of these would provide a truer indication of the nation's financial health, according to Miller. She believes that a clearer understanding of how interest rate hikes impact borrowing, hiring, and starting a business will be instructive and lead to better, more informed decisions that benefit small businesses and the millions who work for them. But for now unfortunately, big business indices continue to dictate policy decisions.

Consult With Counsel

If you are worried about what the interest rate hikes mean for your business, speak to a lawyer. Get guidance.

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