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How Many More Interest Rate Hikes Are Expected in 2023 & When Will Rate Cuts Start?

The economy has been anything but steady lately, and all of this turbulence has some people worried about their financial standing. After a rate increase, it can take a couple of billing cycles before adjustable loans and credit card interest rates also spike, which can lead to a false sense of comfort when you’re not immediately seeing installment loans increase after another rate hike.

As the pandemic comes to an end, many business owners are starting to feel more of a pinch than they have. People aren’t spending as much because they’re starting to experience the increased bills and the lost income, even with government assistance, is hitting hard. Borrowing money to get a car, a home, or other needed items is costing much more, and that’s all part of the goal of slowing inflation. Businesses that got used to the rush of consumer spending are not also feeling it.

As a trucking company owner, you likely are finding it affecting you in other ways. Many motor carriers found their revenues slowing down in the fourth quarter of 2022. Hopes are that things will level out and return to normal workloads by the summer, but the new concern is the increased interest rates and how they’re affecting brokers and shippers. If you’re doing mostly runs for area grocery stores and consumers aren’t buying as much, grocery stores don’t have to stock up as much as they were, so that’s less work for you. 

Those continued interest rate hikes are also impacting many trucking company owners in other ways. Loan rates have skyrocketed. In March 2022, a 20-year SBA loan was at 3.76%. The rate in March 2023 had soared to 6.33%. As interest rates on business loans are almost double, it can be harder to grow your business with much-needed business loans.

The same is true of credit cards. In February 2022, the average credit card rate was 14.56%. It’s at 20.09% in February 2023. Any trucking company with credit card balances is paying a lot more. When will these Fed rate increases finally stop?

How the U.S. Inflation Rate Is Calculated

The U.S. inflation rates are based on the Consumer Price Index (CPI) and the Personal Consumption Expenditures Price Index (PCE). These two areas include items like these in the calculations.

  • CPI: How much consumers are paying for things like prescription medications, computers, food, gasoline, housing, and education
  • PCE: How much businesses say they’re selling items from the CPI for

The government’s goal is to keep the U.S. inflation rates at 2% or less. If rates exceed 2%, the Federal Reserve increases interest rates to slow spending and force inflation to return to that 2%. It was letting rates sit a bit higher during the COVID-19 pandemic to allow for a recovery, but rates started increasing last year and don’t show much signs of slowing.

When Will Rate Cuts Start?

In the U.S., the government’s goal is to keep the U.S. rate of inflation under 2% without triggering a recession, and that’s why they keep hiking up interest rates. In the past year, there have been nine hikes bringing the Federal Funds Rate from 0.25% to 0.50% to its current 4.75% to 5%. Rates haven’t been this high since the early 1990s, so it’s shocking to some adults. 

As of March 31st, the rate of inflation had dropped to 4.98% from 6.04% on February 28th. Compare this to pre-pandemic levels of 1.54% (March 31, 2020). As the pandemic hit and caused businesses to temporarily close, the rate of inflation started to climb. It hit 2.62% on March 31, 2021, and just one month later, it was at 4.16%. By the time President Biden took office, it had neared 8%. 

Because the government wants to see the rate of inflation back near 2% or better, it could be a long time before rates start to decline. Right now, experts believe the Federal Reserve will stop the increases in the summer, but it’s not looking likely that rate decreases will happen until the end of the year. 

Ways to Save Money Right Now

Your trucking company’s focus has to be on saving money. How do you cut your expenses and buckle down when you have clients also facing the same issues you’re facing? 

  1. Look Into a Low-Interest Line of Credit

If you continually find yourself having to pay bills with a credit card until your client pays you, consider applying for a low-interest line of credit. With a competitive rate, you will save money over much higher credit card rates. Just make sure you’re not overspending with that line of credit as that could lead to problems down the road.

  1. Save Money on Fuel

Cut costs on the fuel needed for your trucks. To do this, look for a fuel discount card. You’ll get money off each gallon of gas you purchase. You can also save money by carefully planning your routes. 

Before your drivers head out, make sure you’ve scheduled enough work that they’re not driving with a half-full truck. If you arrange two jobs that are in the same area, they’ll bring in double the money and stay on the same route. Arrange more work for the return trip and boost revenues even more.

  1. Use Real-Time Load Tracking

Real-time load tracking is extremely helpful in saving money. You’ll always know exactly where your drivers are and can arrange additional work as their trailers empty. Plus, real-time tracking keeps your clients happy as they’ll know when you’re about to arrive and can have people read to help unload.

  1. Keep Your Rigs Maintained

Unexpected breakdowns end up costing more money than you’d planned to spend. Keep your rigs maintained and inspected to avoid some of the more common breakdowns. You don’t want your driver to be on the road and have brakes fail due to a small leak in a brake line that could have been prevented with a quick inspection.

  1. Open a Freight Factoring Account

Now is a great time to sign up for freight factoring. You pay a small factoring fee, it’s much smaller than a typical business loan or credit card interest rate, and get paid immediately. You don’t have to pay bills using a credit card and hope you get paid in time to make your payment. If your client pays late and you can’t pay off the money you charged on a card, the 20% interest you’re paying is far more than the minimal freight factoring fee.

Freight factoring is essentially an advance on the money you’re owed. Deliver a load for a broker or shipper and send your bill of lading to Saint John Capital. We pay you the money you’re owed, minus our low freight factoring fee. You choose the best option for your needs. We offer 100% factoring arrangements on loads you’ve delivered to the destination. Or, get 50% of the money due when you pick up the load from the originator and set off to the destination.

If you upload your bill of lading by noon EST, you can get paid the same day! You no longer have to wait weeks or months to get the money you’re owed. You’ll have the cash that you need to pay bills on time, make sure your drivers are paid, and keep your business running without relying on business loans or credit cards with exorbitant interest rates.

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