You say Federal Reserve policymakers believe it’s unwise to cut the benchmark interest rate under current economic conditions? And the president’s administration may not be able to do more at this time to stimulate consumer spending?
It’s a scenario that’s familiar to former NMMA president Thom Dammrich.
“The industry has been through times like this before,” Dammrich told Trade Only Today on Wednesday after the Fed kept the federal funds rate in its current range of 3.5% to 3.75%. “The concern is that the rolling 12-month unit sales of new boats has been declining month-over-month for nearly six years.”
“There are structural issues on the buy side and the sell side that need to be addressed,” said Dammrich, who is now an advisor at Global Marine Business Advisors. “Dealers need to spend more time with buyers who are not ready to buy today and cultivate buyers over longer purchasing time frames to secure the deal. Historically, if a buyer wasn’t ready to buy short-term, the salesperson couldn’t be bothered with them. Dealers need to build a long-term pipeline of potential buyers.”
Shawn DuBravac, chief economist at the National Marine Manufacturers Association, told Trade Only Today that “consumers remain cautious, especially regarding large durable [goods] purchases.
“Companies willing to meet consumers where they are with flexible financing, shared-use models, entry-level product lines and messaging that positions boating as a high-value alternative to more expensive experiences are best-positioned to bridge the divide between latent demand and actual purchase decisions.”
Dammrich said he does not believe that lower interest rates are all that important in driving demand for boats unless the federal funds rate “goes dramatically lower, which does not appear in the cards. At the premium end of the market, most buyers are cash buyers. It is the middle market and the middle class that is struggling the most. And the primary obstacle for the middle class is the affordability crisis in general, and the price of new boats specifically.”
Chad Lyon, managing director, global inventory finance, at Wells Fargo, said lower interest rates would be “supportive” for the boat-sales market.
“Declining short‑term rates reduce dealers’ financing and carrying costs, while lower long‑term rates improve affordability for consumer boat loans, both of which help stimulate demand, particularly in the entry and midmarket segments,” Lyon told Trade Only Today. “However, rates are already meaningfully lower than a year ago, and other factors, including real wage growth, buyer confidence, and inventory and incentive strategies, are now playing a larger role in shaping market outcomes.”
Brian Thompson, an investor and clinical professor of economics at DePaul University in Chicago, believes that boat owners are less sensitive to interest-rate changes in deciding whether to buy a new boat.
“While everyone pays attention to interest rates, a quarter-point difference is less likely to dissuade someone from purchasing a boat or not,” he said. “If anything, it would just affect the size of the boat or related options.”
Dammrich, Lyon and Thompson all agreed that the Fed made the correct decision when it decided to keep its benchmark rate steady for the second consecutive meeting.
“Holding rates steady is the most supportive outcome for the boat market right now,” Lyon said. “Inflation remains elevated, with added uncertainty tied to higher energy prices, while employment conditions are still relatively healthy. In that environment, rate cuts could reignite inflation, ultimately putting renewed pressure on borrowing costs and consumer confidence.
“The increasingly unified stance from the Federal Reserve reinforces this view, signaling comfort with maintaining current policy and providing a more stable backdrop for both dealers and prospective buyers navigating financing decisions,” Lyon added.
Lyon was referencing the vote by which the Fed’s 12-member policymaking Federal Open Market Committee made its decision Wednesday. Three committee members had dissented when the committee approved a quarter-point rate cut in December — with two opposing a cut and one seeking a half-point cut — but just two dissented in January (favoring a quarter-point cut) when the committee decided against any additional reduction.
On Wednesday, there was only one dissenting vote, from Stephen Miran, an appointee of President Donald Trump, who favored another quarter-point cut.
“The Fed made the right call [on Wednesday] by not reducing interest rates,” Dammrich said. “We see more consensus among members of the FOMC than we have in months, with only one dissent. Clearly, inflation has become a greater danger than falling employment. The economy continues to grow, but inflation is headed up again.”
Referencing the oil price increases the Iran war has triggered, Thompson added: “I believe it’s difficult to make a strong argument for lowering rates when energy prices are rising at the pace they are currently. While it’s challenging to assess the Fed’s intentions from the outside looking in, it appears they are becoming more aligned around their policy direction going forward. The external headwinds, coupled with ongoing uncertainty, make it difficult to stray too far from the status quo.”
DuBravac said the Fed “is facing tremendous uncertainty, and that uncertainty likely influenced their announcement more than anything else. The Fed is trying to maintain a delicate balance between inflation, which faces upside pressure, and employment, which faces downside pressure.
“The updated Summary of Economic Projections tells a similar story,” he added. “FOMC members revised their inflation outlook upward to 2.7% for 2026, while also edging their GDP growth forecast slightly higher, to 2.4%. At the same time, their expectations for just one cut this year remains intact. Fed policy hasn’t changed meaningfully, but the environment where that policy must be implemented has changed.”
Americans figure to receive larger income tax refunds this year because of the One Big Beautiful Bill Act that Trump signed last July, but Dammrich said most taxpayers are expecting only about $720 in additional refunds this year because of the new law. He said the current increase in gasoline prices “is likely to eat that up over the next several months. Even if the Strait of Hormuz is opened soon, it will take months for gasoline prices to come down.”
One idea for boosting boat sales is for dealers to target blue-collar workers in such industries as construction, utilities and manufacturing, where wages have been rising. Indeed, the Labor Department’s monthly jobs reports have shown that wages overall for American workers have been increasing faster than inflation for about two years.
“Dealers and manufacturers know who their target consumers are. That is not the issue,” Dammrich said. “I think dealers and manufacturers need to embrace AI as soon as they can and use it to deliver a better sales and service experience. Consumer expectations for response times have shortened dramatically. AI can help dealers and manufacturers be more responsive to potential buyers.”
Lyon said dealers who tailor their messaging to resonate with a broad cross‑section of buyers are taking the right approach.
“The industry should lean into the underlying strength of today’s consumer, supported by solid job growth, healthy employment conditions and rising real wages, and communicate an inclusive, aspirational message that emphasizes the lifestyle and experiences boating provides,” he said. “The objective is to engage all potential buyers who aspire to spend more time on the water.”
“Tax refunds, meanwhile, are unlikely to drive a meaningful surge in boat purchases,” he added. “However, they can play an important supporting role by providing consumers with incremental spending power. That boost can help lift confidence, support broader economic activity and ultimately serve as a modest tailwind for boat sales.”
Thompson sees some merit in dealers pursuing people who work in rising-wage industries as potential boat buyers.
“What is probably less understood is whether the increase in wages across these sectors is outpacing the rise in prices for boats,” he said. “If tax refunds are in fact higher, then there is certainly an opportunity for some of that to flow into the boating industry. I would expect this to be more pronounced for lower‑priced boats.”
Fed chairman Jerome Powell held out the possibility on Wednesday that the Fed could reduce its benchmark interest rate later in the year as the effects of President Trump’s now-nullified tariffs pass through the economy and stop affecting consumer prices.
He told reporters at a post-Fed meeting press conference that tariffs are responsible for half to three-quarters of a percent of the 3.1% year-over-year core inflation increase in the Personal Consumption Expenditures Price Index for January. The PCE index is the Fed’s preferred inflation indicator, and the core rate strips out the volatile food and energy categories.
Powell said the Fed’s forecast is that the central bank will see progress toward its inflation target of 2% as the tariff effects dissipate.
“If we don’t see that progress, then you won’t see that rate cut,” he told reporters.
The Fed’s policymaking committee does not meet again until April 28-29, and Powell said the central bank will learn a lot more about the economy in the six-week period between now and then. It will be the last Fed meeting until mid-June.
Nonetheless, it appears doubtful that the central bank would decide conditions are ripe by then for any rate cut, not to mention the kind of cut that President Trump would like to see.
“In order for the Fed to make any policy rate changes in the next month, or in subsequent months, incoming data would have to convey a very clear story about either accelerating or decelerating inflation or material change in the labor market,” DuBravac said.
Dammrich said the Fed is struggling with how to meet its dual mandate of low inflation and low unemployment, and the tools they have to deal with all of this have opposite effects. “Lowering interest rates to spur employment could ignite inflation, and rate increases to slow inflation will tend to depress employment.
“Right now, whether oil and natural gas begin flowing through the Strait of Hormuz is going to be the major determinant of the Fed’s next move,” he added. “Unfortunately, economists are suggesting the risk of recession later this year is growing if oil prices continue to rise and reach $130 [a barrel] or more.”
Economists had widely forecast that the Fed would hold rates steady at the meeting that concluded Wednesday. Thompson said he doesn’t foresee much change in expectations for interest-rate policy in April “unless there is a major shift in the broader economy.”
“Looking ahead to April, I think by that time we’ll have more visibility into corporate earnings and retail sales,” he added. “This insight will be useful in understanding how pricing is influencing consumer behavior. I believe we would need to see a considerable shift in labor markets to justify any type of rate change in April.”
Powell said the possibility of actually raising the federal funds rate did come up for discussion at the committee meeting this week, but he said the “vast majority” of the Fed governors on the panel “don’t see that as a base case.”
Thompson said an interest-rate increase “does not seem aligned with the Fed’s current strategy. I think most people are expecting a rate decline in the second half of the year.”
