When it comes to interest rates, watching them go up can be painful. Not knowing what they're going to do either way, though, can be even worse.
Such is the case for those who have been trying to make sense of the Fed's recent decision-making process, which has included seven years of not doing anything, then one brief moment of action followed by more indecision.
While much of the attention for rate impacts focuses on big multinational companies and Wall Street banks, small businesses face acute affects as well. Rising rates push up the U.S. dollar, giving owners more domestic purchasing power, while costlier borrowing terms can put a crimp on activity.
Mostly, though, it's the uncertainty that bothers small business.
"It's been like waiting on a curveball," said Tom Wornham, CEO at Private Bancorp of America, a San Diego-based community bank. "All of us have been managing our balance sheets, anticipating that there would be some type of an interest rate hike."
For outfits like Wornham's, the calculus is a little different than on Wall Street, where banks count on higher rates and a bigger spread between yields on securities of various durations. Big banks borrow short and lend long, hoping to capture the difference in costs.
Smaller institutions such as Private Bancorp, or PBAM, rely on strong customer relationships, so they look less to the Fed for rate moves and more toward simple stability. Wornham said he was at a dinner Monday with local business leaders, almost all of whom were "not concerned about the rate raise," but rather about a stable economy and what impact another rush of foreign cash to U.S. real estate would do to the market.
"I've been doing this for three decades," he said. "If there's one thing I've learned, anyone who can tell you where rates are going is either a prophet or a fool. Either way, you don't want to be sitting next to them in an airplane."
The sense of frustration is more pervasive in other areas of small business. Many owners would like to see central bank officials put a more positive face on the U.S. economy, said Bill Dunkelberg, chief economist at the National Federation of Independent Business.
"The major impact of Fed policy, or lack thereof, is basically producing immense uncertainty and no confidence," Dunkelberg said in an interview. "So people won't put their money on the table, they won't expand, they won't hire."
In the financial markets, traders aren't expecting a lot of action this year from the Fed. The central bank hiked its interest rate target a quarter point in December, but financial conditions quickly tightened and left the monetary policy makers in a quandary over what to do next.
A good start would be for Fed Chair Janet Yellen to start expressing more confidence in the economy, Dunkelberg said.
"Central bankers are not cheerleaders for the economy, not by a longshot," he said. Small business owners "don't see recession coming or disaster, they just don't see any exuberance at all in the economy. They're perfectly willing to be in maintenance mode, but they're not willing to plunk out a lot of money."
Once they do decide to start spending money, they'll have decisions to make. One effect of rising rates could be more businesses going to nonbank, or shadow, institutions that aren't bound to a prime rate that will rise after the Fed moves.
"That's viable under a variety of different scenarios, from a standpoint of just availability of credit, the price of credit and the other aspect is the ease of borrowing in many cases," said Greg McBride, chief financial analyst at Bankrate.com. "The risk is if the economy slows suddenly that credit availability on all those channels is going to constrict very quickly, particularly among the shadow banks."
Economic conditions, of course, are what moves the Fed, though officials seem equally tied to market reaction.
The most important thing to keep in mind regarding the Fed is that it won't be hiking rates into weakening conditions, McBride said.
"A lot of the Fed uncertainty stems from the economic uncertainty ... that is impacting businesses of all sizes," he said. "Uncertainty at this point is a much bigger headwind than a quarter-point rate hike. It's the fear of the unknown. Investors hate it, business leaders hate it, and it's a wet blanket over economic growth."