The Daily Interview: What the Fed Rate Cuts Mean for Corporations

With the Federal Reserve having cut short-term rates by 2.5% so far this year, most media attention has been placed on the effects the cuts will have on consumer spending.

John Lonski Chief economist, Moody's Investor Service.

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But these rate cuts can also affect corporate spending by lowering short-term borrowing costs and improving companies' cash flows. The Daily Interview turned to John Lonski, chief economist of debt-rating agency Moody's, to assess what these declining rates mean for corporations.

Lonski says that cash flows have improved for companies as a result of rate cuts, but that they aren't using the money on capital expenditures. Instead, they're refinancing their debt. This reduces financial risk and should eventually help the bottom line, says Lonski, but these positives right now are overshadowed by declining corporate earnings. ...