The U.S. Federal Reserve’s latest decision to hold interest rates steady exposed growing divisions among policymakers, adding fresh uncertainty for the U.S. automotive sector as affordability pressures continue to mount, according to Cox Automotive.
In its latest Auto Market Weekly Summary, Cox Automotive said the Fed’s decision marked its most divided rate hold in more than 30 years, with four dissenting votes reflecting disagreement over the direction of monetary policy.
The report said inflationary pressures also remain elevated. The Personal Consumption Expenditures deflator — the Fed’s preferred inflation measure — rose 0.7 per cent in March, pushing the annual inflation rate to 3.5 per cent, the highest level since October 2023.
At the same time, consumer spending on motor vehicles and parts remained a bright spot. Real spending on durable goods increased 0.9 per cent in March, while spending on motor vehicles and parts climbed 2.4 per cent, supported partly by strong tax refunds.
However, Cox Automotive warned that household finances are becoming increasingly strained. The personal saving rate fell to 3.6 per cent in March, its lowest level since late 2022, as consumers absorbed rising living costs and higher energy prices.
The report also pointed to slowing U.S. housing prices as another concern for consumer confidence. National home prices rose just 0.7 per cent year over year in February, while more than half of tracked metropolitan markets recorded price declines.
Cox Automotive said continued economic uncertainty, combined with high inflation and borrowing costs, could weigh on discretionary spending and vehicle affordability in the months ahead.
