Interest Rates

As many people know the Federal Reserve has recently cut their interest rates. A cut in their interest rates generally triggers a drop in the rates that banks offer for business financing so many people have asked me whether or not they should wait to lock in their loans.

While no one has a crystal ball when it comes to rates, I think the following needs to be taken into consideration:

1) Interest rates are still relatively low when viewed through in a historical context.

2) Other economic factors such as the weak dollar seem to indicate that rates should rise in the upcoming years. It is though that the "cheap" money that has been offered through low interest rates has devalued the dollar.

3) It would appear that commodity prices will be rising over the years and to offset potential inflation, the Reserve tends to raise rates.

4) We are heading into an election year and it seems that the Reserve tries not to rock the boat too much during these times. It is very possible the the Reserve may make changes to their rate, but I don't think we will see anything overly dramatic.

Again, no one has a crystal ball when it comes to this stuff, but if I were to take out a business loan my tendency would be to try and lock a rate for a period of 5 years as I believe their is a greater chance of rates rising than falling during that period.

Mike