Federal Reserve elects to hold interest rates at 0%
The Federal Reserve elected to hold the benchmark for interest rates at 0 percent at its June meeting. (iStock)
The Federal Reserve’s Federal Open Markets Committee (FOMC) held its latest meeting this week, announcing Wednesday that it would hold the federal funds rate at the targeted 0% to 0.25% range, and raised its inflation outlook. More members also projected we will see interest rate increases in 2023 or perhaps as soon as 2022.
While this doesn’t mean interest rates will be 0% on your home loan, student loan, personal loan or any other line of credit, it could cause interest rates to remain near record lows. The federal funds rate does not match or control market interest rates, but in general interest rates are indirectly affected and will follow the direction of the federal funds rate.
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"The committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. With inflation having run persistently below this longer-run goal, the committee will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer‑term inflation expectations remain well anchored at 2%," the FOMC said in a statement. "The committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved."
Over the past year, mortgage refinances boomed as homeowners sought to capitalize on today’s low refinance rates. Many chose to refinance their mortgage loans in order to save on their monthly mortgage payments after mortgage rates plummeted in 2020 and the Federal Reserve lowered the federal funds rate to stimulate the economy.
If you are interested in seeing how much you could save on your monthly mortgage payments with lower mortgage rates, check out Credible to compare rates and mortgage lenders.
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Interest rates could remain low for a while, too. In March, 14 of the 18 Fed members said they don’t expect to increase interest rates through 2022, while 11 members said they don't expect to see rates move through 2023. Now, however, seven voting members projected there could be an interest rate increase in 2022, and just five said rates will remain the same through 2023.
The money markets are also are becoming increasingly confident that we will see an interest rate hike by the end of next year.
If you want to save money before interest rates increase, consider a private student loan refinance to improve your personal finances with a lower refinance rate. Check out Credible to see a rates table and compare multiple lenders at once.
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The economy see could rates move due to some volatility in the near future as it copes with rising inflation and other factors that economists say will be short-term.
"Expect markets to get much choppier in the months ahead as investors wrestle with the pace of job growth, higher inflation, and the Fed’s evolving view on tapering bond purchases," Bankrate Chief Financial Analyst Greg McBride said. "The big picture is that the economy is roaring back, corporate earnings are roaring back, and consumers are poised to spend – all things that portend well for the stock market, despite near-term volatility."
The economy is improving as personal finances improve as well, and that is expected to continue over the next few years. Treasury Secretary Janet Yellen recently projected the economy could reach full employment by 2022. She also said interest rates may need to rise soon to combat inflation, however, raising doubt to the view that today’s inflation surges are a temporary result of the growing economy.
With refinance rates at record lows, mortgage refinances and student loan refinances have surged, alongside new home loans and personal loans. Americans also used stimulus money to pay down credit cards and saw improved credit scores, causing inflation to increase.
If you are interested in seeing what kind of interest rate you could get on a personal loan before rates go up, contact Credible to see options from multiple lenders and get pre-approved in minutes.
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The Federal Reserve is keeping interest rates where they are, for now. Although the need for future rate hikes are increasingly being debated. If you want to see what interest rate you could get on a mortgage, student loan, personal loan or other line of credit, contact Credible to get in touch with a loan expert, compare rates and get your questions answered.
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