Why cheaper debt won’t solve CFOs bigger problems
CFOs are welcoming lower borrowing costs, but warn that rate cuts alone cannot offset pressures from tariffs, supply chains, and consumer demand.
CFOs are welcoming lower borrowing costs, but warn that rate cuts alone cannot offset pressures from tariffs, supply chains, and consumer demand.
For finance chiefs, interest rates matter. Cheaper borrowing can ease refinancing, free up cash for investment, and soften the cost of working capital. But as CFOs on both sides of the Atlantic are quick to point out, funding costs are only one variable in an increasingly complex equation.
The Federal Reserve’s recent shift toward lower rates has been welcomed in boardrooms, yet conversations with finance leaders reveal a more nuanced reality: relief on debt is not a cure-all for tariffs, supply-chain fragility, or subdued consumer demand.
In the US, the discussion is framed by years of rate hikes that have tested balance sheets. Many CFOs now see cuts as overdue but warn against assuming that financing relief translates into broader business confidence.
“Lower rates don’t solve tariff risk or consumer caution,” one retail finance chief noted. “They give us breathing room, but they don’t change the fundamentals we’re managing.”
That sentiment is echoed in Europe, where the Bank of England has faced similar questions on whether incremental easing can offset deeper structural challenges.
UK finance leaders remain wary that high input costs, shifting trade arrangements, and tight labour markets will continue to drive margin pressure regardless of central bank policy.
For consumer-facing businesses, the ability to pass costs through to customers remains fragile.
Victoria’s Secret CFO Scott Sekella recently acknowledged the delicate balance between pricing, discounting, and protecting margins. His comments reflect a broader reality: CFOs are having to calibrate pricing strategy more carefully than ever, aware that consumer confidence is uneven and brand loyalty alone may not sustain higher tags.
European retailers share the same struggle, with cost-conscious customers weighing promotions against inflation-stretched incomes.
Rate cuts may trim financing lines, but they do little to ease the fundamental tension between protecting gross margins and maintaining footfall.
One of the least controllable — yet most consequential — variables for CFOs remains tariffs.
Whether tied to US-China trade frictions or the UK’s post-Brexit trade architecture, sudden policy shifts can wipe out the benefit of lower borrowing costs.
Supply chains remain vulnerable, and while finance leaders have invested in diversification and resilience, many acknowledge that exposure cannot be eliminated entirely.
For CFOs of manufacturing and distribution groups, this makes long-term planning particularly fraught.
Lower rates may make it cheaper to fund warehouse automation or supplier diversification, but the unpredictability of trade regimes continues to cloud ROI calculations.
UK and European CFOs are also watching closely how US monetary policy ripples outward. A Fed easing cycle can weaken the dollar, tightening margins for UK exporters and complicating hedging strategies.
For CFOs managing multi-currency exposures, the benefit of rate cuts on the other side of the Atlantic may be offset by the volatility they introduce into foreign exchange markets.
This international perspective underscores a point finance chiefs know instinctively: monetary policy is only one input in a far more complex operating environment.
What emerges is a picture of CFOs balancing three imperatives simultaneously:
For finance leaders, the Fed’s rate cuts are welcome — but they are a tactical reprieve, not a strategic solution.
The true challenge lies in navigating an operating environment where monetary easing coexists with geopolitical risk, regulatory shifts, and a consumer base that remains both cautious and price-sensitive.
The CFO seat today demands agility: the ability to treat lower rates as one lever among many, without losing sight of the broader forces shaping financial strategy.