Fed Makes Surprise Interest Rate Cuts
The Fed said that risks in the economy are tilted toward “weakness in the foreseeable future” and that inflation pressures that had prompted a string of six interest-rate hikes remained “contained”. The Fed said it is ready to cut the discount rate another quarter point if regional Fed bank presidents request it.
A rate cut is good news for trucking because loan rates – which often use the Fed rates as a benchmark – will likely come down in the coming weeks, and lower interest rates translates into lower interest costs for equipment financing and lines of credit..
The Fed’s policy-setting Open Market Committee approved the rate cuts in a rare conference-call move between regularly scheduled meetings. The Fed’s next regularly scheduled policy meeting is Jan. 30-31.
Growth of gross domestic product, the broadest measure of economic activity, fell to a 2.2% annual rate in the third quarter of 2000 from a 5.6% rate in the second quarter of last year. Analysts, pointing to falling retail sales and industrial production, expect GDP to remain weak in the fourth quarter.
The economy’s sharp drop has cut sharply into company earnings and forced dozens of several companies to cut production. The drop in sales and production has forced several trucking companies out of business.
The lower interest rates resulting from today’s Fed action should help to restore growth in the economy by reducing borrowing costs for consumers and businesses and bolstering consumer confidence. Consumers, battered by stock-market losses and high energy costs, have cut back sharply on spending.
