The U.S. Federal Reserve kept interest rates unchanged today but left open the possibility of a tightening later this year. This was, in part, a response to worries about the global economy, financial market volatility, and sluggish inflation at home. What does this mean for charter schools looking to acquire capital equipment?
In what amounted to a tactical retreat, Fed Chair Janet Yellen said in a press conference that developments in a tightly linked global economy had, in effect, forced the U.S. central bank’s hand. The U.S. economy has been performing well enough to perhaps justify a rate hike “and we expect it to continue to do so,” Yellen said shortly after the Fed’s policy-setting committee released its latest statement following a two-day meeting. But Yellen added that “the outlook abroad appears to have become less certain,” driving down U.S. equity prices, pushing up the dollar, and tightening financial conditions in a way that may slow U.S. growth regardless of what the Fed does. However, the Fed maintained its bias towards a rate hike sometime this year, while lowering its long-term outlook for the economy.
For charter schools this is good news, because it means historically low interest rates continue to be available, at least in the short term. By using a lease finance solution to acquire school equipment,interest rates are locked in at the now low rates for the entire term of the lease – usually 3 to 5 years. This enables the equipment lessee to benefit from the predictability of stable monthly payments and cash flow over the term of the lease. The consensus also seems to be that the Fed will soon start raising rates, probably gradually. This means that acquiring needed equipment now or before the anticipated rate hike makes sense for schools that are looking to acquire equipment within the next year.
How long do you think the low rates will last? How will your school take advantage of the rates? Leave your thoughts below.