Citing the need for “a rapid and forceful response” to prevent a recession from occurring, the Federal Reserve Board lowered interest rates 1/2% today (Jan. 31).

The move by the Fed is expected to result in major banks lowering their benchmark prime interest rate to 8.5% as soon as possible.

An 8.5% prime rate would be the lowest since the December 1999-January 2000 period.

The rate cut today was the second by the Fed during the month of January. The Fed also cut rates 1/2% on Jan. 3.

The Fed decided another rate reduction was needed because “consumer and business confidence has eroded further, exacerbated by rising energy costs that continue to drain consumer purchasing power and press on business profit margins.”

Between the summer of 1999 until last spring, the Fed raised interest rates on several occasions because it was worried about inflation accelerating. But today, the Fed, in its statement, said it believes inflation has been contained.

The rate decrease is good news for the RV industry because it immmediately lowers the floorplan interest costs of many dealers.