On Wednesday, the Federal Reserve pledged to hold interest rates at a record low. It’s hope was that with doing this, it would drive down double-digit unemployment and possibly sustain the recovery of the economy, which it says is growing.
The Fed Isn’t Raising Rates Anytime Soon
Fed. Chairman Bernanke and his colleagues have given no signal that raising rates is anywhere on the agenda in the near future. While they noted that layoffs have slowed, there are still a few issues that need to be straightened out before they feel rates need to be adjusted, including:
- Consumer spending: According to the Fed, consumer spending is still sluggish at best.
- Job market: The Fed notes that the job market is still weak and unemployment is still high. Also, companies are still a bit wary of hiring.
- Wages: There has only been slight growth to wages – not enough to help consumers boost the economy.
- Credit: Though banks have been given ample bailout money, many still want to protect themselves by keeping their credit distributions tight.
The Rates You Can Expect
Here is a list of rates that you might expect from the Federal Reserve in the near future:
- Bank lending rate: Zero to 0.25 percent (this is where it’s stood since last December)
- Credit cards and other consumer loans: 3.25 percent, which is its lowest point in decades
- 30-year mortgage loans: last week, the rate was 4.81 percent, which is down from 5.47 percent last year
According to the Fed, by maintaining super-low interest rates, borrowers will be willing to take on more debt. However, those who were looking for good returns on their savings, money market and CD accounts may feel the brunt of the low rates since they won’t see the returns they’ve hoped for.
If you’re looking for rates to change, don’t expect it anytime soon. Some economists predict the rates will stay the same well into 2010 and possibly into 2011. If you’re concerned about ways to make returns, you might consider learning to invest in the shadow of a recession.
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