How marketers can make the most of the long-awaited Fed cut

Last week’s interest rate cut by the Federal Reserve couldn’t have come at a better time for consumers as the holiday season approaches. And the news will likely put a spring in marketers’ steps as they enter the busiest shopping period of the year.

“Lower interest rates can stimulate consumer spending, resulting in higher demand for products and services,” says Jason Alan Snyder, global chief technology officer at experiential agency Momentum Worldwide. “Brands may want to capitalize on this by ramping up their marketing efforts, focusing on short-term promotional strategies to capture this increased consumer activity.”

The move was widely anticipated, but the cut was bigger than expected. And the Fed has hinted at more cuts to come. All of this will likely boost consumer confidence, if not spending power, says David Bieri, an associate professor at Virginia Tech who teaches economics and finance.

“You could say most people won’t be able to feel this quantitatively in their wallets, but it will give them the feeling that we are on the right track and that the period of cheap money will come back,” he tells The Current. “In that sense, [the cut] is about much more than simply 50 basis points. It’s about the possibility of a return to cheap money forever.”

But it’s not just holiday shopping that might get a boost. This is especially good news for the housing market and other big-ticket items like cars, purchases that are mostly financed. To be sure, homebuyers have been weighing the right moment to jump after mortgage rates hit a two-decade high.

An advertising bonanza

Indeed, we can expect finance and automotive brands to ramp up their marketing messages to consumers, especially around affordability, says Vincent Létang, executive vice president of global market intelligence at Magna, a strategic consultancy that is part of IPG Mediabrands, the media and marketing division of ad giant IPG. He expects to see spend increase in virtually all media channels.

“When the business outlook improves, marketers suddenly have the ability to grow their budget,” he says. “When business outlooks are degraded, they are the first to suffer […] When there’s good news, it immediately has a positive impact on the CMO’s ability to get a better budget from their CEO.”

It’s good timing. A recent report from research firm Forrester found U.S. adults are paying more attention to ads across almost all advertising channels. That includes in-store and pre-roll ads, as well as ads in search and on streaming channels and social media. In fact, the only channel that did not see a boost was print.

Forrester found that as a result, the 20% of marketing budgets currently spent on paid media will increase. To wit: In 2024, 67% of global B2C marketing professionals said they planned to increase advertising spend on digital paid media, while 65% said they planned the same for traditional media.

Meanwhile, IPG’s Magna increased its projection for U.S. media spend in 2024. According to a press release, the firm predicts U.S. ad spend — excluding marquee moments like the Olympics and the 2024 election — will grow by 8.9%, to $377 billion. That’s up from a prediction of 8.2% growth earlier this year, thanks in part to a strong second quarter for media companies.

More disposable income

The rate cut also bodes well for ancillary products like home-equity lines of credit. That, in turn, has a ripple effect on sectors like home improvement and décor.

In the meantime, businesses will be able to access cheaper credit to grow, which means more hiring and potentially higher wages, says Anastassia Fedyk, an assistant professor of finance at the Haas School of Business at the University of California, Berkeley. That provides more disposable income and means consumers can spend in a wider variety of industries, which further boosts retail.

“The Fed’s rate cuts are intended to keep […] the labor market strong without having large layoffs,” adds Ken Kim, a senior economist at professional services network KPMG. “So if people are still employed and gaining income through their wages, then that does provide the means for them to continue their spending into next year.”

But Momentum Worldwide’s Snyder offers a word of caution to advertisers.

“The cost of borrowing for investments in technology, infrastructure or advertising could become more favorable, but with economic uncertainties, companies will need to be cautious about how they allocate resources,” he says. “Ultimately, it’s a mixed bag. Marketers should focus on agile strategies that adapt quickly to changing consumer sentiment and economic conditions.”