LAX Leader

The Federal Reserve has indicated it will implement its first interest rate cut in years at its upcoming meeting on September 17-18. Experts from the University of Southern California (USC) are available to discuss the implications for California’s economy, which is the fifth largest in the world, and its key industries.

Contact: Nina Raffio, raffio@usc.edu or (213) 442-8464; USC Media Relations, uscnews@usc.edu or (213) 740-2215

Market movements await Fed’s decision ahead of presidential election

“Given the official’s stated positions, the Fed is expected to cut rates by either 25 or 50 basis points. My impression is that the markets will react relatively strongly to whichever option the Fed chooses. First, because it will be the last meeting before the presidential election, meaning the decision will be heavily scrutinized in hindsight,” said Ricardo de la O, an assistant professor of finance and business economics at the USC Marshall School of Business.

“Second, because recent data, including today’s jobs report, has been quite mixed and hasn’t provided clear support for either option. The markets are still waiting for decisive evidence in one way or the other, which may not come until the actual meeting.”

rdelao@marshall.usc.edu

Lower rates, sales tax revenue boost transportation projects ahead of the 2028 LA Olympics

“Most of California’s transportation infrastructure – rail and bus systems, new freeway lanes – is entirely publicly funded. Interest rates affect these investments by reducing borrowing costs for private contractors who do most of the construction. This translates to lower construction costs, allowing our public funds to go further,” said Genevieve Giuliano, interim dean and distinguished professor at the USC Price School of Public Policy.

Transportation projects in Los Angeles also rely heavily on sales tax revenue as a funding source, which can be leveraged as collateral for low-interest loans, said Giuliano.

“For example, LA Metro received a low interest federal loan to help construct the Crenshaw/LAX rail line and is using Measure M sales tax revenue to pay off the loan. Timetables for other projects can be accelerated to assure construction before the 2028 Summer Olympics in LA.”

Contact: giuliano@usc.edu

SoCal on track to reinforce its position as a global trade leader

“Federal Reserve interest rate cuts will energize global supply chains, with the San Pedro Bay ports at the heart of this transformation,” said Nick Vyas, director of the Center for Global Supply Chain Management and assistant professor of clinical data sciences and operations at USC Marshall School of Business.

“Lower borrowing costs will drive business investments, boost cargo volumes and improve the flow of goods through Southern California. While inflation had been a major concern, recent signs of its stabilizing provide optimism that this growth can happen without reigniting price pressures.”

Contact: nikhilvy@marshall.usc.edu

Lower rates could push CA tech startups to ‘grow too fast’

California’s tech industry employs well over one million people and accounts for more than 10% of the state’s economy, with startups playing a critical role in driving innovation and job creation within this sector.

“Lower rates can be advantageous for founders since those lower rates will tend to lead to more investment dollars flowing. But as we saw a few years ago that can also lead to investors pushing startups to grow too fast,” said Paul Orlando, director of the USC Incubator Program and an adjunct professor for Lloyd Greif Center for Entrepreneurial Studies at USC Marshall.

“Times of higher rates or just a poor economy in general can actually be a good time to build startups. Founders are forced to be scrappy; they can often hire people who they couldn’t afford in better markets and they build good practices for running an efficient business. The risk is then whether founders can shift styles when situation changes.”

Contact: porlando@usc.edu

Rate cuts offer limited relief to small tech firms as enterprise AI thrives

“As interest rates have risen over past few years consumer spending on big-ticket items like iPhones and houses has slowed affecting companies like Apple that rely heavily on consumer purchases. Meanwhile real growth in tech has come from enterprise AI with major players like Microsoft Amazon Google thriving by selling tools businesses rather than individual consumers,” said Milan Miric associate professor data sciences operations USC Marshall.

“However smaller tech companies have struggled amid higher borrowing costs competition safer investments like U.S Treasuries Fed's interest rate cuts provide them some relief but likely won’t change much,” he added.

“California's well-developed tech infrastructure remains major draw companies policymakers need consider whether state maintain appeal other regions offer lower living potentially better employee retention.”

Contact: mmiric@marshall.usc.edu

Rate cuts won’t thaw California’s frozen housing market

California’s housing market won’t see significant boost from Fed's rate cuts anticipation probably already built into mortgage rates according Richard K Green director USC Lusk Center Real Estate.

“The rates will not come down enough unfreeze sales because people with rates less than 4% about two-thirds market not going want sell homes,” said Green holds Lusk Chair Real Estate professor USC Price USC Marshall.

“For that small share owners adjustable rate mortgage cut rates lead lower rate reset consequently lower payments.”

Contact: richarkg@usc.edu

Falling rates could intensify homebuyer competition

“As interest rates decline homebuyers bid more aggressively homes because monthly mortgage payment declines,” said Matthew Kahn provost professor economics spatial sciences USC Dornsife College Letters Arts Sciences.

“In areas where real estate developers build new housing low interest rates stimulate boom In areas difficult build new housing perhaps due NIMBYism hilly terrain existing homes bid up value” said Kahn senior scholar USC Schaeffer Institute.

Contact: kahnme@usc.edu

Additional Experts

Marco Giacoletti expert housing mortgage markets real estate investments rental markets assistant professor finance business economics USC Marshall Contact mgiacole@marshall usc edu

Sanjay Sharma expert investment banking wide range industry sectors including media entertainment financial institutions technology transportation consumer commercial finance mortgage banking defense aerospace automobile manufacturers Sharma adjunct professor finance business economics USC Marshall Contact sanjays3@marshall usc edu

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