The central bank decided not to raise rates at its June meeting, but it didn’t lower them either, into the land of negative interest rates.
Projections released by policymakers indicate the Fed isn’t likely to make any moves with rates through 2022.
the lowest mortgage rates on record.” data-reactid=”35″That news from Fed Chairman Jerome Powell and his colleagues will be good for borrowers, including homebuyers and homeowners who’ve been enjoying the lowest mortgage rates on record.
The Fed’s not ready to tinker with rates
The Fed announced on Wednesday that it would keep its benchmark interest rate — called the federal funds rate — at its current all-time low, previously seen during and after the 2008 financial crisis and the Great Recession.
chopped down the rate in mid-March as it was becoming clear that the coronavirus posed a serious threat to the economy.” data-reactid=”58″That leaves the Fed’s target for the federal funds rate within a range of 0% to 0.25%. The Fed chopped down the rate in mid-March as it was becoming clear that the coronavirus posed a serious threat to the economy.
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the Fed said in its statement Wednesday.
An accompanying forecast suggested the federal funds rate would stay unchanged for the next two and a half years.
This week brought the official word that the U.S. economy is in recession for the first time since 2009.
Just what the experts were anticipating
Most observers thought the Fed would hold its ground this time. Though unemployment fell surprisingly in May and employers added 2.5 million new jobs, many economists said it was too early for policymakers to declare the economy in recovery and to start raising rates.
Diane Swonk, chief economist with accounting firm Grant Thornton, says too many unanswered questions remain.
“There is no way to know when and how many businesses can safely reopen while maintaining social distancing and preserving the safety of their workers and customers,” Swonk says.
borrowers earn interest for taking out loans.” data-reactid=”66″Few if any experts thought the Fed would go negative with interest rates. In the simplest of terms, negative rates require savers to pay banks to hold their money, and borrowers earn interest for taking out loans.
“Negative rates have failed to prove…