The Federal Reserve, meeting in emergency session today (Sept. 17), slashed interest rates 1/2% to pump cash into the financial system.
The latest rate cut will lower the benchmark prime rate charged by major banks to 6%, the lowest level for the prime since early 1994. The lower prime will take effect Tuesday (Sept. 18).
The latest 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, which have a greater impact on the retail market for RVs, because a high percentage of RVs are bought with long-term loans, have not been declining as sharply as short-term rates this year.
The Fed also hinted it might cut rates further until “normal market functioning is restored.
“Even before the tragic events of last week, employment, production and business spending remained weak, and last week’s events have the potential to damp spending further,” the Fed stated in an announcement issued before the U.S. stock market opened today. “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’s next regularly scheduled meeting will be on Oct. 2.