Economic Uncertainty Creates Crosswinds for Aircraft Financing

Geopolitical tensions. Persistent inflation. Uncertain central bank policy. These factors are stirring volatility across global financial markets—and aircraft financing is no exception.

As interest rate expectations shift and economic signals remain mixed, aircraft owners and buyers face a dynamic landscape.

So what does this mean for financing strategies? And how can buyers navigate today’s uncertainty with confidence?

Let’s take a quick dive into the numbers.

Economic Data: A Murky Outlook

The past few weeks have been eventful, marked by a flurry of economic data releases and ongoing uncertainty over trade policies.

First-quarter GDP data showed the U.S. economy contracted at a 0.3% annual rate, the first contraction since 2022. This slowdown was driven largely by a surge in U.S. imports, as businesses rushed to stockpile goods ahead of possible tariffs. 

However, this GDP estimate likely overstates first-quarter weakness in the U.S. economy due to that import spike.

Even so, the full impact of trade policies has yet to be seen in broader economic data, suggesting more softness could be on the horizon.

Central Bank Policy: A Balancing Act

These mixed signals leave the Federal Open Market Committee (FOMC) facing a tough balancing act.

At its May meeting, the FOMC voted unanimously to hold rates steady. Balancing the Fed’s dual mandate of price stability and maximum employment is proving to be a challenge.

So far, first-quarter data shows no clear impact from tariffs on unemployment or inflation.
This leaves the FOMC with tough choices on which priority to address first.

Much like pilots navigating turbulent skies, the FOMC is monitoring the instruments closely. They’re waiting for clearer economic signals before charting their next course.

Financial Market Volatility: Rates in Flux

These uncertainties have sparked ongoing volatility in the financial markets.

With GDP signaling weakness, inflation still running slightly above the Fed’s 2% target, and unemployment still stable, markets are reacting to these conflicting cues. 

Fed funds futures markets have pushed rate cut expectations further out, now pricing in roughly three 0.25% cuts through the end of 2025. Though, rate expectations have remained volatile since the beginning of the year.

Looking at the 10-year Treasury Rate—a key barometer for aircraft loan interest rates— we’ve seen 50-basis point swings in both directions over the past few months. It ultimately ended (as of this writing) nearly where we started the year, around 4.5%

Impact on Aircraft Financing: Stability Matters

So, what does this mean for aircraft financing?

While aircraft loan rates remain volatile, they’re still below the peak we saw in late 2023. We expect these fluctuations to continue. However, for qualified buyers, this shouldn’t deter action.  

When economic activity slows, it’s not unusual to see credit tightening. While some banks may start to pull back, we remain committed to supporting aircraft buyers through our consistent underwriting approach and deep industry knowledge.

Our advice? Work with a strong, experienced finance institution to provide stability and guidance in these turbulent times.

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