The Rate Cut in Your 2026 Budget Isn't Coming

A distribution company I advise built its 2026 plan last October. They carry about $6M in floating-rate debt, a revolver plus an equipment line, priced off SOFR. Their model assumed two quarter-point cuts by summer, so interest expense dropped roughly $30K on paper, and they used part of that room to justify a warehouse hire. Summer arrived. No cuts came. In June the Fed held at 3.50 to 3.75%, and the new chair spent his press conference signaling the next move might be up, not down. The hire was already made.

Everyone imported the same assumption

Almost every operating plan I read for 2026 had a rate cut in it somewhere. Some baked it into the interest line directly. Others did it quietly, by assuming a refinance next year at a better rate, or a revolver that would cost less to draw. It was consensus, so nobody flagged it as a bet. It was just the number.

That bet is now offside. Kevin Warsh, in his first turn as Fed chair, said "price stability" twelve times in one press conference and called the committee "unanimous and unambiguous" on inflation. Energy prices are up on Middle East tension. Markets that priced one or two cuts this year now price a real chance of a hike. If your plan assumed money would get cheaper, it assumed the opposite of where the odds now sit.

Warsh took away the map, not just the cut

One thing matters more than any single quarter-point. Warsh scrapped forward guidance. No dot plot. A shorter statement that describes today and refuses to hint at tomorrow. For a decade, finance teams at companies your size borrowed the Fed's forecast for free and planned off it. That crutch is gone.

So you can't set your rate exposure against anyone's projection anymore, because the institution that made the projection stopped publishing one. You set it against your own exposure instead.

A rate assumption you never wrote down is still a bet. The only difference is you can't hedge a bet you didn't notice you made.

Reprice the plan, then build a trigger

Two moves this week. First, pull every place a rate assumption is hiding. The interest lines, the floating debt, the refi you penciled for next year, the covenant headroom that thins if rates rise. Rerun the plan flat, then rerun it up 50 basis points. If the up case trips a covenant or eats the margin that funded a hire, you want to know in July, not November.

Second, replace the Fed's guidance with your own. Pick the benchmark level that would actually change a decision, the point where you'd defer the hire or pay down the revolver, and write it down as a trigger with a name attached. When you can't borrow someone else's forecast, you build a rule that fires on the number itself.

The cut in your budget was never a plan. It was a hope you inherited from the market, and the market changed its mind in June. Find where it's still sitting in your model before your revolver reprices and finds it for you.