Good morning. The Federal Reserve did not lower interest rates on Wednesday. That will likely influence the decision-making process for many CFOs when it comes to capital expenditures.
On Wednesday night in Atlanta, during Fortune’s CFO Collaborative dinner, sponsored by Deloitte, Dennis Lockhart, former president and CEO of the Federal Reserve Bank of Atlanta, told a group of finance chiefs from leading companies that he wasn’t surprised by the Fed’s decision.
When the Fed lowered rates in September, November, and December of last year, it was a recalibration phase to address inflation, Lockhart explained during a conversation with Fortune’s Diane Brady. “Now they will wait and see how things unfold,” he said. Lockhart also thinks the Fed will not cut rates in March.
“I sympathize with all of you as CFOs, because it’s a very difficult year to look ahead and capture the different scenarios in your plan that could unfold,” he said.
Some of the Trump Administration’s policies could affect the economy, Lockhart said. “It could be a fairly sizable effect, you just don’t know,” he said.
He added that opinions are all over the map when it comes to tariffs, some of which may come into effect as soon as Saturday—and, when they do, will have a big effect on commerce and prices. Lockhart also cited other Trump policies that may prove disruptive.
“Mass deportation, which is underway, the effect on the labor market, remains to be seen,” Lockhart said. The key industries that could be impacted are construction, agriculture, leisure and hospitality, home care, and to some degree, health care, he added.
“If I were a CFO today in January of 2025, and could get away with it, I’d have two budgets—budget A and budget B,” Lockhart said.
Budget A would reflect a pretty optimistic continuation of a relatively strong economy, a very nice labor market situation, and probably gradually declining inflation, he explained. But budget B has to factor in the effect of policies such as tariffs, mass deportations, and more activity from bond vigilantes, he said.
Finance chiefs appear to be turning bullish about the economy and their company’s prospects for 2025, according to Deloitte’s fourth quarter 2024 North American CFO Signals survey. However, despite the increase in optimism, when asked to identify their top priority for this year, enterprise risk management was the most cited answer.
Lockhart also shared that while at the Atlanta Fed, they would engage with business leaders to gain insight. Between meetings, the Fed would ask them the question: How are you experiencing the economy? “That’s a good question to ask,” he said.
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna.
Leaderboard
Lin Tao was promoted to CFO of Japanese conglomerate Sony (NYSE: SONY), effective Apr. 1. She will succeed current COO and CFO Hiroki Totoki, who will step away from the position to assume the roles of president and CEO. Tao currently serves as SVP of finance, corporate development, and strategy for Sony Interactive Entertainment, the subsidiary that operates the PlayStation brand of video game consoles and products.
Scott Sekella was appointed CFO of Victoria’s Secret (NYSE: VSCO), America’s largest lingerie retailer, effective in June. He will succeed Timothy Johnson, who is retiring. Sekella most recently served as CFO of fabric and crafts retailer Joann. He previously held financial leadership roles at apparel companies Under Armour and Crocs.
Big Deal
As expected, the Federal Reserve decided to hold interest rates steady after its first meeting since President Donald Trump was sworn into office for his second term. The S&P 500 sank 0.5% on the news, though bond yields ticked lower as traders seemingly backed off from their initial reading of a more hawkish Fed, which said in a statement that inflation “remains somewhat elevated.”
Fed chair Jerome Powell expressed confidence that the U.S. economy could move towards the central bank’s 2% inflation target without further weakening in the labor market. He also reiterated that the Fed remained flexible. “We’re not on any preset course,” he told reporters.
The Fed’s decision frustrated Trump, who told the World Economic Forum in Davos that he would “demand” the central bank lower interest rates. In a post on Truth Social Wednesday, Trump accused Powell and the Fed of creating and failing to stop inflation, while Democratic senator Elizabeth Warren also attacked the central bank for standing pat.
During his press conference, Powell said he would not respond to comments from Trump—or any politician—and said he had not been in contact with the president. While he also declined to talk specifics about the Trump administration’s policy proposals, he said the central bank forecasts for a wide variety of positive and negative scenarios.
“The committee is very much in the mode of waiting to see what policies are enacted,” he said. “We don’t know what will happen with tariffs, with immigration, with fiscal policy, and with regulatory policy. We’re only just beginning to see—and actually are not really beginning to see much. I think we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
Going deeper
Apple topped Fortune’s ranking of the World’s Most Admired Companies for an 18th consecutive year, finishing first in our All-Stars list based on a poll of 3,380 executives, directors, and securities analysts. The iPhone maker also performed well in Fortune’s survey of industry insiders, indicating that experts remain confident about the company long-term despite criticism that it has fallen behind in the AI race. Speaking of AI, chip behemoth Nvidia finished No. 1 among all companies in six of the nine categories rated by insiders—the first company to do so since Apple in 2016.
Overheard
“It doesn’t make any sense to try to walk it back. We’ve paid the price…putting China on high alert that chips are a strategic technology, and incentivizing the whole global supply chain to avoid using U.S. components so as not to be subject to extraterritorial controls.”
—Helen Toner, director of strategy at Georgetown’s Center for Security and Emerging Technology and a former OpenAI board member, said in an interview with Fortune’s Sharon Goldman about why she believes revoking export controls on AI chips would be a “huge victory” for China.