Chair of the United States Federal Reserve System (and replacement for Ben Bernanke) Janet Yellen expressed feelings of optimism in discussing the health of our country’s economy. Yellen’s opinion came as she testified in front of Congress Wednesday morning, leaving some experts surprised of no announcement to raise interest rates during her testimony.
It was speculated last month by many that an additional rate hike would be happening as soon as this summer, which pointed toward yesterday’s testimony from Yellen as a probable date for an increase.
On December 16, the Fed announced they’d raise interest rates for the first time to increase the federal fund rate by 0.25%. December’s increase marked the end of an extraordinary seven-year period where the rate was held near zero.
The federal fund rate is not the same as the prime rate. However, it has always had a direct impact on the prime rate, which is the benchmark interest rate most banks offer to their least risky customers. In short, if the federal fund rate goes up, you can expect the prime rate to go up shortly after.
Raising the federal interest rate has an enormous impact on a multitude of different aspects of the economy. The rate was lowered as close to zero as possible back in 2008 to stimulate the economy and incite borrowing during the well-document housing and mortgage collapse.
December’s increase might have seemed inconsequential, as one-quarter of one percent is admittedly a small number. But if we read the tea leaves a bit, the likelihood of one or multiple interest rate hikes from the Fed seems like an inevitability at this point.
So if there is one takeaway from this news, it’s that the time is now to lock in a loan at the lowest possible interest rate. Higher rates mean more money paid out over the term of your loan.
So if you’re planning on leasing equipment, be sure to contact Funding Well Capital. We’re your number one business financing source and our staff is experienced in all corners of finance to help you obtain the best loan for your company.
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