The Federal Reserve announced today it's keeping its benchmark federal funds rate unchanged at a target range of 3.5% to 3.75%, and for auto retail, that means not much changes about the environment dealers are already navigating.
What we know: In a written email shared with CDG News, Moody's Analytics' Michael Brisson said today's decision is less a new shock and more a continuation of the same pressures.
To his point, with rates still restrictive, financing costs stay elevated, and that hits affordability hardest for lower-credit and payment-sensitive buyers.
“Dealers are relying more on incentives, rate subvention, and longer terms to manage payments, particularly on new vehicles where prices are still historically high,” Brisson told CDG News. “Used vehicles are somewhat better positioned on affordability, but tighter credit standards limit upside there as well.”
Michael Brisson
Why this matters: Eleven of the 12 committee members backed the hold, while Stephen I. Miran "preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting," according to the official Fed statement published at 2 p.m. EST today.
In their decision, the Fed cited continued solid economic growth and a stable labor market, but flagged that inflation remains somewhat elevated.
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Geopolitics are also actively complicating the outlook, a factor both Brisson and the Fed committee emphasized today.
According to Brisson, “Since the start of the Iran conflict, we’ve seen some upward pressure on longer‑term rates driven by higher oil prices and inflation risk premiums, even as safe‑haven flows have intermittently capped how far yields can rise.”
Looking ahead: The Fed's projection of one rate cut in 2026 remains in place, with the possibility of another in 2027.
For now, though: “The net effect for auto is that borrowing costs haven’t meaningfully eased, and volatility around rates has increased, making planning more difficult for both lenders and dealers (and ABS market),” Brisson said.
This is a developing story. Please check back for updates.
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