The Federal Reserve announced another interest rate increase in an ongoing effort to tamp down inflation, executing an anticipated fourth consecutive 0.75 percentage point rate hike Wednesday.
The series of rate increases is intended to alleviate the problem of rising prices, including for vehicles, but they make borrowing less appealing for many and could reduce car buying in what’s an already inflated market due to pandemic-fueled pressures.
Though the rate of inflation has slowed since the Fed started the interest rate hikes, it remained high in September at 8.2%, according to the Consumer Price Index of the U.S. Bureau of Labor Statistics.
Raising the benchmark federal funds rate increases the cost of consumer loans for cars and other commodities.
The auto industry has already been grappling with low inventories due to pandemic-related supply scarcity and shipping bottlenecks, with increased sticker prices being the end result for buyers. Now the rising interest rates threaten to turn more consumers away from purchasing.
Originally posted on F&I and Showroom