We are in a very strange place right now, economically speaking. Interest rates are at an all time low and are expected to get even lower. Both the American Federal Reserve and the European Central Bank (ECB) are trying to stimulate their economies so as to try and avoid a recession and generate economic growth, which is slowing down worldwide.

At the end of this month (July 30 – 31) the chairman of the US Fed., Jerome Powell, is expected to announce a 0.25% cut in interest rates, - the first time in eight years, - bringing US interest rates to 2%. More interest rate cuts by the US Fed. are anticipated before the end of the year.

In order to keep up with America, the ECB is also feeling dovish (wanting lower interest rates) and an interest rate cut is also very likely. The bizarre thing, from a European perspective, is that interest rates are already in minus territory (currently at -0.3%).

It’s hard to imagine a situation where you apply for a loan of say €100,000 and the interest rate given is -0.3%. That means the lending institution pays you €300 per annum for the privilege of giving you the money. How bizarre is that? An unlikely situation as the above mentioned interest rates only apply to banks and governments looking to borrow money to and from each other.

So what do all these low interest rates mean for Irish machinery dealers and buyers? Well it depends on our banks. The bad news is that these historically low rates do not apply to retail borrowers and are not the rates given by the high street banks. As some of you already know, that have taken out loans before, the interest rates that are being charged by the banks are many times above the ECB rates.

There are a few options open to the buyer - buy the equipment, or take out a loan or lease. Taking out a loan would be more attractive if the banks or financial institutions would pass on these lower interest rates to the customer. This would help stimulate the economy by getting people to buy more. Lower interest rates could pave the way for dealers and distributers to offer their customers financial package incentives to purchase large machinery fleets at little or no extra cost. Some of the bigger companies are already doing this and even offer 0% finance packages which are subject to their terms and conditions. An arrangement could even be made that after, say five years, the fleet would be replaced with brand new equipment for a small extra cost.

Given that the Inflation rate in Ireland is currently around 1.1%, according to figures recently released, the 0% offer could be very attractive indeed. However not all companies are offering finance packages.

Since the financial crash of 2008 banks have become very wary of lending out large amounts of money to their customers unless there is security given to offset the loan, and rightly so. However, with lower interest rates, the ability for businesses to repay the loan should become much easier.

I hope the banks will be more understanding and accommodating in this lower interest rate environment. After all, in order to survive, dealers need to sell more machines.