Interest Rate Uncertainty Is Now a Permanent Planning Variable
- Jerry Justice
- 6 days ago
- 7 min read
Executives have spent two years waiting for the Fed to finish. Wait for the picture to clear. Wait, then commit.
That picture isn't coming. Not this quarter, not this year, and not within any window a capital committee can trust.
The Federal Reserve left its benchmark rate parked at 3.5 to 3.75 percent through its June meeting, the first chaired by Kevin Warsh, and the accompanying projections, detailed in Fed interest rate decision June 2026: Fed holds rates steady, told a story worth taking seriously. The committee erased its earlier signal of a cut later this year and pushed the next reduction out to 2027 and 2028, even as it raised its inflation outlook for the balance of 2026. That is not a Fed edging toward resolution. That is a Fed telling you, in its own language, that resolution isn't the current objective.
Companies still building budgets around the assumption that a stable rate environment is one or two meetings away are making a decision. They just aren't calling it one.
Waiting Is a Position, Not a Pause
Every delayed investment communicates something. It tells employees that priorities remain unsettled. It tells lenders that management lacks conviction. It tells competitors that time is available for someone bolder to take.
I have watched organizations learn, often later than they wished, that the greatest financial risk was not an interest rate increase. It was allowing uncertainty to dictate the pace of decision-making.
Most finance teams treat interest rate uncertainty as a temporary condition to be endured rather than a permanent variable to be modeled. The instinct is understandable. Single-scenario planning is faster to build and easier to present to a board. It produces one number, one narrative, one clean recommendation.
Many executives keep asking where rates will land six months from now. The better question is whether the strategy holds up if rates move either direction.
Here's the harder truth. A capital plan built on "rates will settle by Q3" isn't a plan. It's a bet dressed up in spreadsheet formatting. Building for a range takes more work than building for a point estimate, and most planning calendars don't budget the extra time.
What the Data Says About Interest Rate Uncertainty
The Federal Reserve Bank of Richmond publishes a quarterly survey of finance chiefs that deserves more attention than it gets outside the banking press. Its most recent release, CFOs Concerned About Inflation, Cost Pressures, showed real GDP growth expectations downgraded to 1.8 percent for the next four quarters, down from 2.1 percent just one quarter earlier, alongside a 1.1 percentage point increase in cost and price growth projections for the year. That's not a crisis forecast. It's evidence of how much a single quarter can move the numbers underlying a budget.
The prior quarter's release, CFO Outlook Holds Up Despite Continued Tariff Concerns, Uncertainty, found investment intentions holding roughly flat, with about a third of firms planning structural investment and nearly two-thirds planning equipment investment. Meanwhile, 39 percent of firms reported that tariff policy had already affected their price expectations, and 48.5 percent said it had affected cost expectations.
This is not a new pattern. The CFO Survey, the longer-running joint publication of Duke University's Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, has tracked it before. In one recent release, CFOs Remain Optimistic for 2024, about a quarter of firms said access to or the cost of financing would constrain capital spending over the next twelve months, and those firms said they would invest roughly 40 percent more if that limitation disappeared. The number moves from one survey edition to the next. The underlying discipline problem does not.
Read those numbers together and a pattern emerges. Finance leaders aren't frozen. They're still deploying capital. What's changed is how many separate variables now sit inside a single investment decision, each one capable of moving independently of the others.
Range-Based Planning Beats a Single Bet
The shift that's actually working, in the companies handling this well, isn't more forecasting. It's different forecasting. Price the capital project at today's rate, at a meaningfully higher rate, and at a modest decline, then ask whether the decision still makes sense in all three. If it only clears the bar in the optimistic case, you don't have a project. You have a hope.
Frank Knight, the University of Chicago economist whose 1921 book Risk, Uncertainty, and Profit established a distinction economists still lean on a century later, put it directly: "Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated." A rate that might land somewhere in a one-point range is a risk. A rate that could break in either direction depending on decisions not yet made in Washington is uncertainty. Most capital models still price the second as if it were the first.
Some finance teams push further and build automatic trigger points into their capital plans. If the ten-year moves through a defined threshold, a project gets re-underwritten before the next committee meeting rather than well past it.
A working range-based model generally covers:
A funding-cost floor, a base case, and a stress case, priced against the actual project timeline rather than today's spot rate
A pre-agreed threshold that triggers re-underwriting, so the decision to revisit a project isn't left to whoever happens to notice the market has moved
A short list of projects that clear the bar even in the stress case, ranked separately from the ones that only work if funding costs cooperate
One person accountable for updating the model on a set schedule, not whenever there's time
That last point sounds minor. It isn't. Range-based planning fails almost as often from neglect as from bad math. A model nobody updates is worse than no model, because it creates false confidence.
The discipline pays a measurable dividend. In How Nimble Resource Allocation Can Double Your Company's Value, McKinsey's Yuval Atsmon found that companies actively reallocating capital delivered a 10 percent average annual return to shareholders, against 6 percent for companies that left budgets largely unchanged year over year. Over two decades, that gap compounds into roughly double the enterprise value.
The Board Needs Better Questions
Boards carry governance responsibility through uncertainty, not around it, and the quality of the questions in the room often matters as much as the precision of management's forecast. When a capital plan comes forward for approval under conditions of real interest rate uncertainty, directors deserve answers to a short list of harder questions:
What assumption would need to break for this plan to fail?
At what point does management commit to changing course?
Which indicators deserve weekly attention instead of a quarterly mention?
Those questions move the emphasis away from predicting the economy and toward preparing the enterprise, long before the first dollar moves.
The Global Layer Most Plans Ignore
Every boardroom debate about the Fed skips a step for companies with cross-border exposure. Your funding cost isn't just a domestic rate. It's a domestic rate plus a currency assumption plus whatever your regional lenders are doing on their own timelines, and those three variables rarely move together.
A capital plan built for a business with operations across the Americas, EMEA, and Asia-Pacific has to model funding costs in each region separately, then stress-test the combination. A project that clears the bar in dollar terms can fail once local currency financing and hedging costs are added back in, and the reverse is just as common.
This doesn't require a treasury department the size of a multinational bank. It requires acknowledging, at the planning stage, that a domestic Fed decision is one input among several rather than the whole model.
Resilience Is Not the Finish Line
Most capital plans built for this environment stop at survival. They ask whether the company can absorb a bad quarter, refinance without panic, hold headcount through a downturn. That's a reasonable floor. It isn't a strategy.
Nassim Nicholas Taleb, the former derivatives trader and author of Antifragile: Things That Gain from Disorder, drew a distinction worth keeping close here: "Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better." A finance function built only to survive volatility will survive it. A finance function built to use volatility, buying assets competitors are forced to sell, locking in financing terms while rivals wait, ends up somewhere better than where it started.
What Jackson Hole Won't Resolve
The Federal Reserve Bank of Kansas City hosts its Jackson Hole Economic Policy Symposium from August 27 through 29. This year's stated focus is financial innovation and its implications for payments and policy, not a referendum on the near-term rate path. That choice of agenda is itself informative. The central bank setting your funding costs isn't organizing its own marquee event around when clarity arrives.
"The Fed is choosing to look through the fog of conflict, for now," Jamie Cox, managing partner at Harris Financial Group, said back in March, shortly after the Fed first held rates steady following the outbreak of the U.S.-Iran conflict. The comment appeared in Reaction roundup: Experts, analysts weigh in on the Fed. Five months later, at the June meeting, the posture hadn't changed. Markets will parse every Jackson Hole panel for hints anyway, because that's what markets do. Executives building five-year capital plans have a different job. Stop waiting for the central bank that sets your funding costs to tell you when it's safe to commit. It has already told you, several times now, that it doesn't know either.
The finance teams pulling ahead this year aren't the ones with the best rate forecast. They're the ones who stopped needing one.
A decade from now, the executives remembered for handling this period well won't be the ones who guessed the Fed's next move correctly. They'll be the ones whose organizations kept moving while everyone else waited for permission that was never going to arrive.
When the Plan No Longer Fits the Environment
Aspirations Consulting Group works with finance and executive teams at the exact moment a plan built on old assumptions stops holding up. Range-based models, trigger-based capital deployment, and board questions that test a plan's assumptions before the market does are the discipline separating the companies still waiting from the ones already moving. If your planning process still assumes rate clarity is coming, a confidential conversation with our team at www.aspirations-group.com is a reasonable next step.
Keep the Discipline Sharp
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Thanks for reading!
~ Jerry Justice
Living to Serve, Serving to Lead™
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