- On 28 October the EU granted the United Kingdom a Brexit extension until 31 January 2020.
- On 30 October the Fed cut rates for the third time this year, a change of direction compared with previous years.
- Both events suggest caution and flexibility: avoid final decisions based on calendars that may move again.
On 28 October 2019 the European Union granted the United Kingdom a Brexit extension until 31 January 2020, and two days later, on 30 October, the Federal Reserve cut interest rates for the third time this year. Two pieces of news from different spheres, one political and one monetary, but sharing an underlying message: the environment remained uncertain and public decision-makers preferred to buy time or provide support rather than risk a rupture. The new deadline gave more room, but it also prolonged the need to keep operational the plans prepared for the case of a disorderly exit.
For companies and families with international interests, both decisions have practical consequences. The extension affects the timetable of business with the United Kingdom. The rate cut, financing conditions and the return on savings. Understanding why they happen and what they imply helps to place one’s own decisions calmly, without reacting to every headline or waiting for everything to become clear.
Another extension
The exit planned for 31 October did not happen: the new extension moved the deadline to the end of January 2020. It was the second time that a date presented as firm had been postponed, and it confirmed that the Brexit timetable was subject to political developments rather than to any immovable rule.
One more postponement eased the immediate threat of an abrupt exit, but prolonged the wait and kept uncertainty alive for those with interests on both sides. For companies that had prepared contingency plans for 31 October, the new deadline meant keeping them alive for three more months, with the organisational effort that entails. Each change of calendar forces a fresh look at the costs of maintaining those plans and a decision on how long it is worth doing so.
The Fed acts again
Two days later, the Federal Reserve cut rates for the third time this year. Three cuts in a few months indicated that the central bank saw reasons to support the economy, though not necessarily that a crisis was expected. Central banks often act preventively to stop a slowdown from taking hold.
It was a change of direction compared with previous years, in which rates had tended to rise. For those with debts, a lower-rate environment eases the cost of borrowing; for those who save, it reduces the expected return on the safest products. Each family or company should consider which side of that equation weighs more in its case. For savers, a low-rate environment means accepting that certain objectives will require more time, more contributions or more risk, and that this decision must be taken with information.
What to do
These two events suggest caution and flexibility. On the business side, continue with contingency plans for Brexit: keep contracts, currency hedges and logistics alternatives up to date, and check that the cash position allows a longer period than expected to be endured without forced decisions.
On the financial side, review the structure of debt and savings in a lower-rate environment. And in both cases, avoid final decisions based on calendars that may move again. An adviser can help distinguish which decisions need to wait for a firm date and which can be taken now under current rules and conditions.
Political calendars change; plans, to be sound, have to be flexible.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
