Interest rate hikes reflect optimistic economic trends
We’re seeing signs every day that the global economy is recovering. And the Federal Reserve’s recent moves are reinforcing that message: higher interest rates are a reflection that the economy is in a good place. While we expect the Fed to raise interest rates two or three more times this year, we don’t expect additional impact to auto sales.
Forecasts have indicated lower auto sales for 2018, but those predictions already take rising interest rates into account. JP Morgan analysts agree that the Fed’s approach will get us closer to a normal situation faster rather than a slow, gradual rise, which would then take a couple years to normalize.
From a retail lending perspective, auto sales continue to be strong despite the increases in interest rates. This is in part due to recent increases in incentive spending, but more importantly it represents high consumer sentiment. As consumers take a more positive view on overall business climate and the state of their personal finances, they’ll be more open to spending on goods and services that matter to them.