Today the Federal Reserve announced that they would not raise interest rates, at least not for now……
“No decision has been made by the committee about the right timing of an increase, but certainly an increase this year is possible,” Fed chair Janet Yellen said in a press conference held on Wednesday, June 16, 2015. Most people would agree, that’s the good news.
What might not be such good news is the reason rates aren’t going up. The Federal Open Market Committee (FOMC) sharply downgraded their economic forecast for this year. In March, they had projected the economy would grow between 2.3 % and 2.7%. Now they are predicting more like 1.8% and 2% this year. The FOMC forecast the unemployment rate, which was 5.5% in May, would drop to no lower than 5.2% by the end of the year. In March, they forecast the jobless rate would drop to as low as 5% this year and that annual inflation would be between 0.6% and 0.8% this year — the same as was forecast in March. The Fed’s annual inflation target was 2% target.
If that’s not enough information to digest, a recent survey of Wall Street executives showed that 92 percent predict a Fed rate rise this year, up from 84 percent in a survey last April.
What does this mean for equipment financing decisions going forward?
In an unpredictable marketplace, most business executives agree that preservation of cash and predictability of expenses are two critical aspects of any equipment financing decision. Preservation of cash allows a company to respond quickly to changing market conditions and the use of fixed-rate, fixed-term financing options provides the safety of predictability in expense levels.
Businesses need equipment in every economy. In today’s economy, it’s especially important to examine all the possible options when it comes to paying for that equipment.
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