The Federal Reserve board yesterday announced that it would lower interest rates a quarter point to 4% to 4.25%, saying that a soft job market outweighed its concerns about persistent inflation.
The Fed said in a statement: “Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.”
The statement continues: “In support of its goals and in light of the shift in the balance of risks, the committee decided to lower the target range for the federal funds rate by one quarter percentage point to 4 to 4.25 percent.”
The interest rate cut, which lowered the key interest rate to its lowest in four years, should be good news to dealers who are carrying aging inventory through floorplan financing.
“The cost of floorplan is our largest concern,” one respondent said in the monthly Pulse Report survey, the results of which are published in Soundings Trade Only. They continued: “Being a seasonal business, you are used to ups and downs and run lean, but aging inventory and the relentless pounding of interest and principal payments is the looming black cloud.”
Additionally, dealers have struggled to sell boats in the middle to low ends of the market, citing elevated interest rates as a barrier to getting boat loans.
“New-boat sales are trickling through but overall remain down, especially in the 18- to 21-foot categories,” one dealer responded in the survey. “Buyers with average household incomes are struggling to justify the payments, etc. Big boats continue to sell, but at a slower rate, as most of the big-boat buyers have not had dramatic changes in wealth.”
The committee will meet again in late October and early December to consider further rate cuts.
