Rent or Lease: Climbing Interest Rates to Impact Financing Markets

Categories : Procurement Goals | Set Strategy | Save Money | Reduce Risk Published on : Mar 22 2018

By: ProcurementIQ Analyst, Mark Seraydarian

In the first meeting led by new Federal Reserve Chairman Jerome Powell, eight out of eight officials voted to increase interest rates. The benchmark federal funds rate, which is the interest rate at which banks lend reserve balances to other banks on an overnight basis, will rise 0.25 percentage points, landing between 1.5% and 1.75%. This increase comes in response to declining unemployment and rising inflation, which has moved toward a 2.0% target. As a result of the meeting, Fed officials also plan to make two more rate increases before the end of the year, as well as three in 2019 and two the year after, leaving rates in a range of 3.25% to 3.5% in 2020.

As it becomes more expensive for procurement departments to finance large purchases through loan programs, they may prefer to rent or lease expensive products and services. Markets like earthmoving machine rental, forklift rental, fleet vehicle leasing and medical equipment leasing could all undergo increased demand in the coming years. More downstream interest will place upward pressure on list prices, so prudent buyers should lock in prices sooner than later to avoid steeper costs at a future time.

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