While referencing conditions of consumers who might be purchasing particular vehicles in your inventory or are already contract holders within your portfolio, Federal Reserve chairman Jerome Powell reiterated the impacts made by policymakers involving interest rates do not necessarily fire as quickly as a vehicle’s push-button ignition.
Powell appeared during another press conference on Wednesday afternoon following the Fed cutting interest rates for the third time this year. By a 7-2 margin, the Federal Open Market Committee (FOMC) decided to lower the target range for the federal funds rate to 1.50% to 1.75%. The two committee members who did not vote in favor of the action supported the strategy of leaving the rate unchanged.
The FOMC will conduct its last meeting of the year just before Christmas with the possibility of policymakers pushing rates down again. Powell cautioned that what the Fed already has done takes time to percolate through the economy.
“The policy adjustments we have made to date will continue to provide significant support for the economy,” Powell said during the opening portion of his latest gathering with the media. “Since monetary policy operates with a lag, the full effects of these adjustments on economic growth, the job market and inflation will be realized over time.
“We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2% objective,” he continued. “We believe monetary policy is in a good place to achieve these outcomes.
“Looking ahead, we will be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the fed funds rate,” Powell went on to say. “Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.”
Earlier in his opening remarks, Powell mentioned the upbeat situation in connection with a specific consumer segment; individuals who sometimes need what the subprime auto finance industry can provide.
“The U.S. economy is in its 11th year of expansion, and the baseline outlook remains favorable. The overall economy is growing at a moderate rate. Household spending continues to be strong — supported by a healthy job market, rising incomes and solid consumer confidence,” Powell said.
“In contrast, business investment and exports remain weak, and manufacturing output has declined over the past year. Sluggish growth abroad and trade developments have been weighing on those sectors,” he continued.
“Looking ahead, we continue to expect the economy to expand at a moderate rate, reflecting solid household spending and supportive financial conditions,” Powell went on to say. “The job market remains strong. The unemployment rate has been near half-century lows for a year and a half. The pace of job gains has eased this year, but has remained solid. We had expected some slowing after last year’s strong pace. Participation in the labor force by people in their prime working years has been increasing. And wages have been rising, particularly for lower-paying jobs.
“People who live and work in low- and middle-income communities tell us that many who have struggled to find work are now getting opportunities to add new and better chapters to their lives. This underscores for us the importance of sustaining the expansion so that the strong job market reaches more of those left behind,” he added.