The Federal Reserve's decision to keep interest rates steady was not a surprise for financial markets, and it does little to alter the fundamentals shaping access to capital within the cannabis industry.
The pause reflects recent economic data showing a balance of risks between inflation and employment, signaling that further rate hikes are unlikely in the immediate future. For cannabis businesses operating under debt, the absence of additional tightening offers short term relief, although that relief does little to change the industry's financing reality.
"The Federal Reserve's decision to hold interest rates was widely expected by market participants and reflects recent economic data which suggests a balance of risks between employment and inflation," explains Anthony Coniglio, CEO of NewLake Capital Partners. "While the absence of a rate cut may be disappointing for those operators hoping to reduce interest expense, the bias towards steady or lower rates should reassure them that higher borrowing costs is off the table for now."
Despite this, Anthony points out that interest rates are not the biggest issue facing cannabis businesses, as instead structural issues continue to do far more damage to capital availability and pricing. "Frankly, the lack of a rate cut is the least of cannabis operator problems since structural challenges continue to constrain access to capital for the industry. High effective tax burdens under 280E, limited access to traditional banking, and the continuing refinancing cycle remain far more influential than the Fed's near term posture."
According to Anthony, improvement will depend on progress at the federal level rather than incremental shifts in monetary policy. "Meaningful improvement will require progress on federal reform, rescheduling, tax normalization, and mainstream banking access," he said. "Until then, operators will continue to rely on disciplined balance sheet management and operational efficiency."
For real estate focused capital providers like NewLake, the current market status reinforces a conservative deployment strategy centered on stability rather than growth. "At NewLake, we remain focused on supporting well capitalized operators and deploying capital prudently as the market continues to mature," Anthony says.
For more information:
NewLake Capital
www.newlake.com
