A View from Here

Bill's Sisson's weekly Trade Only blog

Lower interest rates could have ripple effect

Will the Fed’s rate cuts work?

This is the million-dollar question the boating industry now struggles with in an economy that some say is headed for a recession. 

The Fed obviously considers recession a threat, because it’s cut a key interest rate by 1.25 percentage point in the last two weeks — an unusually strong response.

The Fed’s move does not directly affect long-term loans, such as many boat loans, said Donald Parkhurst, senior vice president of SunTrust Bank in Fairfax, Va. But it could have a trickle-down effect. Marine loans, for example, dropped about a quarter percent soon after the Fed made an emergency three-quarter percent cut last week, according to Parkhurst.

But this doesn’t mean that banks will rush to increase their lending portfolio. According to Fortune, banks like Citi and Bank of American have been boosting their capital cushion for future losses. Setting aside bigger reserves means less money for lending to businesses and consumers.

That’s why some economists expect additional rate cuts, which could be a boost for the marine industry.

We’d like to know your thoughts on the lower rates — has there been an uptick in boat sales after similar Fed rate cuts in the past? Will they have an impact this year? How have manufacturers managed their inventory pipelines in previous economic downturns?

-Lois Caliri
 Editor

Comments

3 comments on “Lower interest rates could have ripple effect

  1. Capt. Jim Battye

    Four months ago, Greg Proteau wrote a piece titled, “Will the Lower Rates Hurt Boating?”, in which he said

    “With the discount rate cut yesterday it shows how concerned the Fed is about the softening economy tied to the perception of shaky credit markets. The other “huge” factor I think is going to hurt boating is the falling home values in many parts of the country where people have tied purchases to what had been growing home equity.”

    Is this a legitimate concern, today?

  2. Wiulson Wright

    An interesting thought from Glenn-L maker of kit boats…Some say the economy is so bad we’re all doomed to financial disaster….And true some have been hurt by the downturn in the housing and stock markets…..but there will be just as many who make money in those same markets…..Could be that just messing about in boats takes your mind off those troubles.

  3. Bill Warner

    The home value decline will overcome any and all rate cuts…can’t see the cuts being able to create the urgency for the consumer to make a purchase especially with the DAILY NEGATIVE ECONOMIC PRESS THE MEDIA PROVIDES the consumer…we can hope the cuts can help pull out the housing indusrty then in turn jump start the economy which will eventually trickle down to the boating industry..it was always handy to dip in the eline to close the boat deal when buying or selling…too many people felt like millionaires during the realestate run …those days are gone……LETS MAKE AN EXTRA EFFORT OUT THERE AT THE MIAMI SHOW …HOLD OUR HEADS UP HIGH AND SHOW SOME ENTHUSIASM BUYERS SENSE THE FEAR ESPECIALLY THE ONES FROM OVERSEAS

    MAKE IT A GREAT SHOW SEASON OUT THERE

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