Key Takeaways:
- The Fed held interest rates steady in March 2025, creating a short-term window for business leaders to lock in financing, revisit capital needs and reinforce liquidity.
- Consumer spending is softening, with February sales underperforming expectations and discretionary categories weakening.
- Inflation remains elevated and tariff measures are adding new cost pressures, as evolving trade policy complicates the economic outlook.
As 2024 came to a close, the Federal Reserve had cut rates three times, prompting speculation that further easing was on the horizon.
But inflation has proved more stubborn than expected — and new tariffs added pressure to input costs — shifting the outlook considerably. By March 2025, the Fed made its position clear: policymakers voted unanimously to hold rates steady, signaling caution amid a complex and uncertain economic landscape.
As the summer months approach and uncertainty around tariff measures remains, the short-term trajectory for interest rates looks likely to hold steady. For business leaders, this creates both challenges and opportunities, especially when it comes to managing liquidity, adjusting pricing strategies and preparing for a potentially slower-growth quarter.
In this article, we’ll break down what business leaders need to know about today’s economic conditions and how to plan for the months ahead with confidence.
Note: The insights in this article are based on current information and projections. While they provide an overview of anticipated trends, they should not be considered financial advice. We encourage readers to consult with a Comerica advisor for tailored guidance as they navigate these economic changes.
Fed Pause: A Window for Strategic Liquidity Planning
The Federal Reserve’s March 2025 decision to hold interest rates at 4.25% – 4.50%, along with its move to slow the pace of balance sheet reduction, confirms what many economists had begun to expect: Rate cuts are off the table for now.
For business leaders, this creates a narrow but important planning window. With rates steady and borrowing costs momentarily predictable, now is the time to reassess capital needs, lock in favorable financing terms and strengthen liquidity before the environment shifts again.
There appears to be a moment of clarity in an otherwise uncertain year. Smart businesses will use it to make strategic moves while conditions allow.
What to consider during this planning window:
- Review your current capital structure. If you’re carrying variable-rate debt or planning major investments, this may be a good time to explore fixed-rate options that offer predictability.
- Evaluate your working capital needs. With interest rates steady for now, consider whether a line of credit or a short-term financing solution could help smooth operations or support strategic growth.
- Stress-test your cash flow projections. Modeling different inflation and sales scenarios can help ensure your liquidity strategy is resilient, especially if costs climb or demand softens.
- Talk with your banking advisor. The right financing tools, paired with updated treasury and cash management strategies, can help you stay flexible as the economic picture evolves.
A rate pause creates space to plan. Strategic moves made now can strengthen your footing for the rest of 2025.
Inflation Holds, Tariffs Hit
The inflation story of 2025 continues to evolve.
In March, the Federal Reserve revised its 2025 inflation forecast upward to 2.7%, while core inflation is now expected to reach 2.8%. That’s a meaningful shift from December’s projections and a clear sign that price pressures remain embedded in the economy.
Compounding the inflation issue is the ongoing question of tariffs. On April 9th, the Trump administration’s “reciprocal” tariffs officially took effect — but later, a 90-day pause was announced for most countries, excluding China. As of today, the tariff landscape includes a 145% tariff on Chinese goods, a 10% baseline tariff on most global imports, and ongoing 25% tariffs on steel, aluminum, cars and car parts.
This remains a highly fluid situation, with additional changes likely in the days and weeks ahead.
While some U.S. producers may benefit from reduced foreign competition, many businesses are now facing higher supplier prices without a corresponding increase in pricing power. For business leaders, this mix of persistent inflation and rising trade costs presents a clear challenge: how to protect margins without eroding customer trust.
Steps to consider in a rising-cost environment:
- Implement cost-monitoring processes. Set up regular reviews of input cost changes — especially for tariff-sensitive categories — so your team can react quickly and adjust budgets, pricing, or sourcing as needed.
- Reforecast cash flow with inflation and tariff exposure in view. Use conservative estimates when planning for the next two quarters. Factor in the potential for additional trade-related costs, slower customer spending, or elongated payment cycles.
- Evaluate supplier diversification. With tariffs fluctuating and supply chain volatility rising, businesses may benefit from diversifying vendor relationships across regions to reduce exposure.
- Lean on financial tools that preserve liquidity. From revolving credit lines to treasury management solutions, ensuring access to working capital can help buffer against near-term cost spikes without disrupting growth plans.
When input costs rise and policy shifts are unpredictable, the best defense is strong forecasting and steady liquidity.
Consumer Spending is Cooling
In February 2025, retail sales rose just 0.2%— well below forecasts — and followed a downward revision for January. Discretionary categories in particular saw weaker results, a clear signal that consumers are pulling back on nonessential purchases.
This slowdown isn’t just post-holiday fatigue. Consumer confidence surveys have slipped, with headlines around tariffs, inflation and layoffs contributing to a more cautious mindset, especially among middle-income buyers.
For business leaders, this shift may not require drastic changes, but it does warrant closer attention to how your customers are behaving, what they’re prioritizing and how that aligns with your current pricing and product strategy.
Ways to respond to softer consumer demand:
- Refine your value proposition. In uncertain times, customers prioritize clarity and value. This may be a good moment to revisit how your offerings are positioned, especially in terms of price, packaging or bundled services.
- Explore flexible pricing models. Consider options like tiered pricing, loyalty incentives or limited-time promotions that can preserve volume while maintaining margin control.
- Look for margin improvement within operations. If top-line growth is softening, profitability often comes from the inside. This could mean trimming nonessential costs, renegotiating supplier terms or automating manual tasks that consume time and resources.
- Watch for shifts in your customer segments. Are higher-end buyers holding steady while others pull back? Are certain products or services outperforming the rest? Understanding where demand remains strongest can help you focus resources more effectively.
A softer retail environment calls for sharper focus. Small shifts now can preserve margins and strengthen loyalty.
In Summary
The Fed’s steady stance offers rare predictability in a quarter likely to be defined by uncertainty. Inflation is proving stubborn, consumer confidence is slipping and trade policy continues to shift week by week.
For business leaders, now is the time to prepare for a market that may turn quickly. From sharpening financial flexibility and securing access to capital to revisiting pricing strategies and tightening operational efficiency, smart planning can help sustain momentum through whatever comes next.
As you look ahead, connect with a Comerica representative to evaluate how today’s conditions could affect your financial strategy.