The Federal Reserve decided Wednesday to hold interest rates at historic lows, continuing the positive borrowing environment that has aided hospitals and others in the healthcare sector for years.
Access to low-cost debt has been good for hospitals and other healthcare companies that rely on borrowing to finance growth, said Megan Neuburger, a managing director at Fitch Ratings in New York City.
But Fed interest rates are so low today—one-quarter to one-half percent—that even an increase of a quarter percent would have done little to dampen borrowing for whatever purpose, Neuberger said.
“Twenty-five to 50 basis points would not have a big impact,” she said.
Instead, Fed Chair Janet Yellen signaled no increase in rates in June. And odds increased that the Fed would raise rates just once in 2016 rather than twice, as more trustees on the board said they were leaning toward one fewer increase this year.
The healthcare sector benefits from low interest rates because its thousands of hospitals, insurers and vendors predominantly borrow the money they need to expand rather than generate it through equity placements or other financial instruments.
The Fed appeared ready earlier this year to begin hiking rates as unemployment fell near 5% and has since fallen below. But poor jobs reports in April and May have given Fed trustees pause that hikes to fight inflation may not be so pressing.
Hospital stocks were mixed Wednesday on the Fed news.
Tenet Healthcare Corp. and Acadia Healthcare were up about 1% a half-hour before the close of trading. HCA Holdings was down 12 cents to $77.89, while LifePoint Health was down 65 cents, or 1%, to $66.44.
