Fed Roundup: Auto Doing Fine, Rates Going Nowhere for Now

A new report out of the Federal Reserve Bank of New York illustrates that the automotive industry, which has long been fueling the success of the manufacturing sector, has yet to slow down. Meanwhile, historically low federal funds rates look to be safe, according to a Fed official based in Minnesota.

The New York Fed’s “Q2 2014 Household Debt and Credit” study illustrates that demand for auto loans continues to surge despite any concerns related to the economy. Auto loan debt increased by $30 billion since the first quarter of the year and by $91 billion since Q22013. “We observe continued strength in the auto loan market with the largest volume of originations since 2006,” said Donghoon Lee, senior economist at the New York Fed.

Meanwhile, this week’s speech by Federal Reserve Bank of Minneapolis President Narayana Kocherlakota originally intended to focus on community banking strayed into the greater economic outlook. Kocherlakota, a member of the Federal Open Market Committee, said the Fed was far from reaching its targets for price stability and remained confident that inflationary pressure will be low for a number of years. In that, he strongly hinted that the target for the federal funds rate – now at a historic rock-bottom range between 0% and 0.25% -- was unlikely to be to see an increase anytime within the next year. It reiterated predictions made in surprisingly transparent FOMC statements of the recent past.

- Brian Shappell, CBA, CICP, NACM staff writer

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