PHILADELPHIA -- The most recent decline in interest rates bolster expectations that the economy will continue to expand, analysts at PNC Financial Corp. said in their monthly investment policy statement.
The recent cut in the Federal Reserve's discount rate, to 3%, and in the federal funds target rate, to 3.25%, "only cements further the case for a stronger economy," said the Philadelphia investment unit of the Pittsburgh-based banking company.
It added that lower rates will allow corporations to reduce their debt costs, while consumers continue to reduce debt and refinance high-rate mortgages at more favorable, adjustable rates.
Other positive signs noted by the economists included five straight monthly increases in the index of leading economic indicators; an anticipated one-percentage-point contribution to third-quarter economic growth by the auto industry, based on its inventory depletion and current production schedules; and the improved health of banks, which will make them more willing to make consumer loans.
