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Fed Cuts Rates 1/4%, Hints More Possible

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August 21, 2001 by   Comments Off on Fed Cuts Rates 1/4%, Hints More Possible

As most economists expected, the Federal Reserve lowered interest rates another 1/4% today (Aug. 21).

However, what may be more important to the outlook for the economy was the Fed’s statement today that it continues to be more worried about the sluggish pace of economic growth, than it is about inflation. That means, additional rate reductions can be anticipated later this year.

The next regular meeting of the Federal Reserve Board Open Market Committee is scheduled for Oct. 2.

The Fed’s action today, in all probability, will lead to banks lowering their benchmark prime interest rates to 6.5%, from 6.75%. That should further boost RV dealer profits because many of them have their floorplan interest rates pegged to the prime rate.

A prime rate of 6.5% would be the lowest since the spring of 1994.

However, the Fed’s action today, most likely, will have relatively little impact on longer-term loan rates, including the rates on loans to consumers for buying RVs.

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