Despite worries that the economy is sliding back into recession, the Federal Reserve Board decided today (Jan. 29) to leave interest rates unchanged.
Consequently, the prime rate, to which many RV dealers’ inventory finance loans are pegged, remains at 4.25%, its lowest level since 1958.
Only two years ago, the prime rate was 8.5%.
While some economists believe the Fed. should cut rates again to avoid a recession, others worry that federal deficits resulting from the war on terrorism and possible war against Iraq will eventually require interest rate increases to prevent inflation from rekindling.
However, the Fed. decided today that it is too early to either raise or lower rates.
“Oil price premiums and other aspects of geopolitical risks have reportedly fostered restraint on spending and hiring by businesses,” the Fed. stated today. “However, the (Fed.) believes that as those risks lift, as most analysts expect, the accommodative stance of monetary policy, coupled with ongoing growth in productivity, will provide support to an improving economic climate over time.”
The next regularly scheduled Fed. meeting will be on March 18.