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For the sixth straight meeting, the Federal Open Market Committee (FOMC) increased its target for overnight interest rates by a quarter percentage point to 2.50% today (Feb. 2) and signaled that rates will rise further in coming months.
According to CBS MarketWatch, the FOMC repeated language that its monetary policy stance was accommodative and that this “accommodation” could be removed “at a pace that is likely to be measured.” The verbiage mirrored the Fed’s last statement issued on Dec. 14.
Following the Fed’s announcement, other lending rates were expected to follow suit. The benchmark prime rate, which directly affects RV consumer and dealer buying habits, will be raised a corresponding quarter percentage point to 5.5% by end of business today.
Although interest rates are a primary economic factor with regard to high-dollar discretionary consumer purchases, including recreational vehicles, rates still remain at relatively low levels.
“I think that interest rates are a key barometer in consumer confidence and consumer confidence has a direct overlay with RV sales,” said Jeff Lambert, president of Grand Rapids, Mich.-based Lambert Edwards & Associates, which tracks the industry. “However, January’s solid consumer conference numbers should offset this small interest rate hike.”
He added, “All of this should be kept in context in that interest rates are still fairly low. I believe we’re still a long way from RV consumer angst over interest rates.”
The FOMC said that output was growing at a moderate pace despite the rise in energy prices, and labor market conditions “continue to improve gradually.”
Inflation and long-term inflation expectations “remain well contained,” the statement said.
CBS Marketwatch reported that the FOMC was careful to leave its options open, repeating that it “will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.”