On Tuesday (Sept. 21), the Federal Reserve Board raised interest rates 0.25%, the third time since late June.
As a result of the Fed’s action today, banks and other lenders can be expected to raise their benchmark prime interest rates to 4.75%.
A higher prime rate can also be expected to raise RV dealers’ interest expenses. However, recently released data from Spader Business Management, the best source available for dealer financial data, provides a mixed message concerning interest costs, because the firm’s figures cover the first seven months of this year, diluting the impact of the first 0.25% rate increase enacted on June 30.
The prime rate stood at an even 4% from late June 2003 until this June 30, when the Fed enacted the first rate increase. The second came on Aug. 10.
The Fed’s next regularly scheduled meeting is set for Nov. 10.
A 4.75% prime rate is the highest since November 2002, when the Fed slashed interest rates by 0.50% to stimulate economic growth to avoid a recession.
In its statement issued today, the Fed said it wants to prevent inflation from accelerating and that a 4.75% prime rate still is low enough to allow for robust economic growth.
“Despite the rise in energy prices, inflation and inflation expectations have eased in recent months,” officials said in today’s statement. “After moderating earlier this year partly in response to the substantial rise in energy prices, output growth appears to have regained some traction, and labor-market conditions have improved modestly.”
Reacting to the Fed’s comments, stocks rallied Tuesday afternoon. The Dow Jones Industrial Average closed up 40.04 points, or 0.4%, to 10,244.93, while the Nasdaq Composite Index added 13.10 points, or 0.7%, to 1,921.17 and the S&P 500 rose 7.10 points, or 0.6% at 1,129.30.