Citizens Financial Group announced a change to their prime lending rate. Effective December 17th, 2019, the prime lending rate is set to increase from 8.00% to 8.25%. Prime lending rate is the cost of borrowing for short-term investments, and is an indicator of the larger economy.
Why the change?
Citizens Financial Group has seen an increase in the demand for financing, indicating that businesses are expanding and borrowing money for expansion purposes. This increase has caused Citizens Financial Group to re-evaluate their prime lending rate due to the following:
- Financial Strength: The financial strength of the group has been increasing, leading to more capital which has allowed them to reduce the rate.
- Demand for Financing: The demand for short-term financing has increased, signaling that businesses are expanding.
- Federal Reserve Interest Rate: Citizens Financial Group is raising their prime lending rate in line with the Federal Reserve’s recent increase in interest rates.
- Economic Climate: The current economic climate has proven to be conducive to the increase of the prime lending rate.
What it means for Businesses and Consumers?
This change in prime lending rate will have a direct impact on businesses and consumers alike. The increase in rate will result in increased costs of financing for businesses, which will likely be passed on to consumers. Consumers will also have to take into account the new rate when taking out a loan.
Citizens Financial Group’s decision to increase their prime lending rate is an indication of the health of the economy. The increase in demand for financing, combined with a strong footing for the group, has enabled them to adjust their prime lending rate. This will potentially lead to higher costs for businesses and consumers, but also signals continued economic growth.