Interest Rates to Remain Near Zero for Years — What Should You Do About It?
Written by
Dawn Allcot
Edited by
Daria Uhlig
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In spite of fears that the Federal Reserve would increase interest rates amidst economic recovery and widespread vaccine distribution, Chairman Jerome Powell announced in a statement Wednesday that it will continue to hold the key interest rate near zero until 2023. The Fed concluded its two-day Federal Open Market Committee meeting yesterday.
See: Fed Meeting — Rates to Be Unchanged Until 2023
Find: Goldman Sachs Economy Prediction (It Could Grow 8%)
The Fed noted in a statement following this week’s meeting that it plans to keep interest rates near zero until inflation has risen above 2% “for some time” as it awaits the economy’s return to full employment. The Fed predicts unemployment will fall from 6.2% to 4.5% by the end of 2021, and it expects inflation to hit 2.1%, just a hair over the target, by 2023, USA Today reported.
In his news conference Wednesday, as reported by USA Today, Powell reiterated that he isn’t troubled by rising treasury yields. The Fed will continue its bond-buying stimulus for the time being, perhaps eventually moving to purchasing bonds with longer maturities or just buying enough to keep the yields from rising above a specific target.
See: Economy Explained — Understanding Interest Rates, How They Affect You and the US Market
Find: Fed Chair Powell Testifies Before Congress — ‘Economy Will Depend on the Course of the Virus’
Wall Street responded favorably to the news, with the Dow closing at 33,015 yesterday and the S&P 500 up 32 points to 3,974.
For average Americans, interest rates near zero mean you’ll continue to find good deals on mortgage loans, although the seller’s market continues to drive up home prices. Realtor.com’s market data from March 6 showed median listing prices up 14.3% year over year, marking the 30th consecutive week of double-digit growth.
It can also be a good time to take out a home equity loan to pay off higher interest debt. And stocks remain a solid investment, as blue-chip, S&P 500 stocks and ETFs are likely to outpace inflation.
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