September 2025 – Why High Interest Rates Won’t Last and What It Means for U.S. Manufacturing

As of mid August 2025, the Federal Reserve’s effective federal funds rate sits at 4.33 percent, down noticeably
from 5.33% a year ago, and even below its long term average of around 4.61 percent. Yet many still feel the pinch of high financing costs. So why haven’t rates dropped more sharply, and what gives us reason to think that relief is on the way, especially for U.S. manufacturers?

The Fed is walking a tightrope. On one hand inflation remains stubborn, particularly in services and industrial inputs. Producer prices, for instance, jumped 0.9 percent month over month and 3.3 percent year over year in July, fueling ongoing caution around premature rate cuts. On the other hand, job growth has slowed significantly. Employers have added roughly 35,000 jobs per month this summer, down sharply from 123,000 a year ago. Some Fed officials argue that this cooling job market signals it’s time to ease, while others worry inflation is not yet tamed.

Despite conflicting signals, markets are leaning toward a rate cut as early as September. Housing and brokerage sectors are beginning to anticipate it. Brokerage firms like Charles Schwab and Robinhood saw gains recently tied to rising expectations of a rate cut. And Treasury Secretary Scott Bessent even called for a bold 50 basis point cut
at the September Fed meeting, shaking things up in ways few expected.

In short, the current moment gives us a clear window. Slow job growth and easing wage pressures create enough cover for the Fed to shift course. If a cut happens in September, it’ll signal real momentum toward lower financing costs.

Lower interest rates mean lower borrowing costs across the board, for plant upgrades, equipment purchases, inventory financing, and working capital. For an industry where machinery and heavy equipment often come with six-figure price tags, even modest rate drops pay dividends. Borrowers can refinance existing loans, afford to replace older machinery faster, or tap into growth capital without waiting for a next quarter of solid cash flow.

The prospect of rate cuts isn’t just good news, it’s a cue. September could become a pivot month when manufacturers who’ve held off investment start moving. Used and surplus markets, where Surplus Record shines, especially benefit in such windows. Demand often surges when capital gets cheaper. More affordable financing means faster equipment turnover, more deals, better margins, and renewed confidence to invest. So if you’ve been on the sidelines, start preparing!