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Fed lowers rates for the first time in 2025

• On September 17, the Federal Reserve’s Federal Open Market Committee (FOMC) voted to lower interest rates to a target range of 4.0% to 4.25%, down 0.25% from the rate it had been holding since November of last year.
• Despite indications at the start of the year that steady reductions to the relatively high 4.25% to 4.5% rate were on the horizon, the Fed held off on rate cuts for much of the year due to concerns that the combination of higher tariffs and a reduction in borrowing costs could cause rebounding inflation.
• The September cut to Fed interest rates signals a shift in this strategy, indicating that the Fed now considers weakening employment figures a greater threat than inflation. As a result, FOMC officials have also signaled that two additional rate cuts are likely before the end of the year in an effort to fight unemployment and stimulate the economy.
• Declining Fed funds rates will provide relief to borrowers by lowering the market interest rates for consumer and business loans. This reduction in the cost of borrowing will reduce the cost of many banking and financial services, and may spur increases in demand across the economy.

GSA memo asks agencies to review consulting contracts

• The General Services Administration (GSA) recently issued a memorandum asking government agencies to review their consulting contracts with the ten highest-paid firms. The ten firms are Accenture PLC (Accenture Federal Services), Booz Allen Hamilton Inc., CGI Group Inc. (CGI Federal), Deloitte Touche Tohmatsu (Deloitte Consulting), General Dynamics Corporation (General Dynamics IT), Guidehouse Inc., Huntington Ingalls Industries Inc. (HII Mission Technologies), International Business Machines Corporation (IBM), Leidos Holdings, Inc., and Science Applications International Corporation, Inc. (SAIC).
• The memo states that agencies are strongly encouraged to cut non-essential consulting contracts, providing a list of those intended to be terminated by March 7, 2025. By April 19, 2025, agencies must submit their reviews of non-GSA consulting service contracts.
• According to the GSA, the ten consulting firms identified are set to receive $65.0 billion in fees in 2025. The Department of Defense (DoD) has stated its intention to terminate or descope contracts non-essential to the DoD’s purposes; some of the largest market players with high-value DoD contracts include Booz Allen Hamilton, Deloitte, and Accenture.
• According to the Government Accountability Office, in the fiscal year 2023, government agencies spent $478.0 billion on services, with the DoD accounting for $230.0 billion and non-defense agencies accounting for the rest. The DoD spent $21.3 billion on support, professional, and engineering and technical services, while non-defense agencies spent $21.4 billion on professional services, which includes consulting, training, and support services.
• The Department of Veterans Affairs (VA) initially cancelled 875 contracts (amounting to around $2.0 billion) but has currently paused efforts. However, contract terminations across most agencies are expected to continue.

The DOJ proposes Google breakup in latest tech antitrust action

• In August, Google was found guilty of operating as a monopoly and engaging in anti-competitive practices through the operation of its search engine business.
• In response to this ruling the Department of Justice (DOJ) has stated it will seek a breakup of Google’s business segments, among other similarly harsh penalties. While the actual penalty Google receives must be approved by the judge, the DOJ’s proposed penalties signal a zero-tolerance policy toward tech monopolies.
• During the last few years, the Federal government has significantly increased its enforcement actions against major technology companies in an effort to contest the high level of market share concentration in this sector.
• These actions include high-profile anti-trust lawsuits against Amazon, Apple, and Meta, in addition to the case against Google. Consequently, the results of these lawsuits could significantly affect the structure of a wide range of tech markets.