For the second time since the terrorist attacks on Sept. 11, the Federal Reserve has slashed interest rates.
Meeting in regular session today (Oct. 2), the Fed cut interest rates 1/2% to lower the benchmark prime rate charged by most major banks to 5.5%, the lowest since 1972.
Meeting in emergency session on Sept. 17, the Fed lowered interest rates also by 1/2%.
The Fed decided to dramatically lower interest rates because, it said today, “The terrorist attacks have significantly heightened uncertainty in an economy that was already weak. Business and household spending as a consequence are being further dampened.
“Nonetheless, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate,” the Fed added.
Today’s rate reduction will further reduce RV dealers’ inventory carrying costs, because most of their floorplan interest rates are pegged to the prime.
However, long-term interest rates have a greater impact on the retail market for RVs, because a high percentage of RVs are bought with long-term loans. At least so far, long term rates have not declined as sharply as short-term rates, despite repeated rate cuts by the Fed this year.
The Fed’s next regularly scheduled meeting will be on Nov. 6.