Amidst the slow economic growth in the US, the Federal Reserve has announced that interest rates will not rise throughout 2019. After a meeting which lasted for 2 days, the monetary policymakers decided that the interest rate is going to remain at 2.25% – 2.5%. The Fed also made an announcement that by September, the 3rd Quarter of 2019, they will not be decreasing their bond portfolio. The main reason for this is to ensure that the borrowing rates will be kept low.
Before now, the feds had raised the interest rates four times last year and up to nine times since 2015. By indicating that there will be no further rate increases for 2019, the Fed foresees that there might be a rate increases in year 2020 and likely none in the year of 2021.
What This meant For Everyone
This benchmark rate of 2.25% – 2.5% affects everything from mortgages, to credit card and even home equity credit lines. On the surface, the moves signal no major increases in borrowing rates for consumers and businesses. And when you add the Fed’s dim forecast for a 2.1 % growth this year, down from a previous projection of 2.3%, there is a growing concern about the economy.
The news caused the indexes of the stock market to perk up in the beginning, but the rise soon declined and by the end of the day, most stocks were low. Analysts are reporting that the poor outlook on the economy by the Fed may have alarmed investors. However, low-interest rates support more economic growth and borrowing, so investors who invest in stocks are anxiously foraging for a better economic growth given a slowing global economy.
Those most likely to gain are home buyers since mortgage rates drop are a great news to them as they head into the spring home buying season. The real estate property market had struggled for the past one year, as prospective homebuyers / investors had put their purchase on hold due to the rising mortgage interest rate. For now, potential buyers will be delighted to learn about this. This is also mean good news to people who already own homes and are looking to refinance.
Of course, it’s not all good news. These low rates will affect savers who had just begun to taste the fruit of higher interest rates in their interest generating saving / investment accounts and bonds.
This news is partly a response to slowdowns in the United States & world economies. “We’re in a very different world today,” said Jerome Powell, who is the Fed Chairman. He also emphasized that the Fed is carefully observing the financial situations and stability in the market.
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