What Will Higher Interest Rate Mean for Equipment Buying?

The Federal Reserve raised interest rates last week and signaled that two additional increases were on the way this year. This came as officials expressed confidence that the U.S. economy was strong enough for borrowing costs to rise without choking off economic growth.

Jerome H. Powell, the Fed chairman, speaking in unusually blunt terms, said the economy had strengthened significantly since the 2008 financial crisis and was approaching a “normal” level that could soon allow the Fed to assume a more hands-off role in economic activity.

The Fed’s optimism about the state of the economy is likely to translate into higher borrowing costs over the next year.

Last week’s rate increase was the second this year and the seventh since the end of the Great Recession. It brings the Fed’s benchmark rate to a range of 1.75 to 2 percent. The last time the rate topped 2 percent was in late summer 2008, when the Fed was cutting rates toward zero.

In February, Lessiter Media’s Farm-Equipment dealer surveyed asked, “Would a modest interest rate increase affect your customers’ equipment purchasing decisions?”

Sixty-four percent of dealer respondents said higher interest rates would negatively affect farmers’ decision to purchase equipment this year. Some 26 percent said they didn’t think higher rates would be a determining factor, and 10 percent said they didn’t know.