Fed keeps interest rates at 0%, but plans to hike rates in 2022
The Federal Reserve ended its September meeting on Wednesday in announce that it will keep the fed funds rate within its target range of 0% to 0.25%. That is until labor market conditions show substantial progress and its long-term inflation outlook increases. However, he did signal that he would likely hike rates starting in 2022, and that there might be three more rate hikes in 2023.
“With the progress of vaccinations and strong political support, indicators of economic activity and employment continued to strengthen,” the Federal Open Market Committee (FOMC) said in its statement. âThe sectors most affected by the pandemic have improved in recent months, but the increase in COVID-19 cases has slowed their recovery. “
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The Fed is developing an economic stimulus plan
As the economy continues to improve, the central bank prepares to adjust monetary policy to end its economic stimulus later this year and start raising rates next year. This is sooner than expected, as the Fed did not plan to hike rates until 2023.
âThe job market has improved, inflation is skyrocketing and supply chain constraints persist,â said Mike Fratantoni, senior vice president and chief economist of the Mortgage Bankers Association (MBA). “As a result, it’s no surprise that the Fed is starting to remove the accommodation. The biggest news from this meeting has been the change in FOMC projections, with most members now seeing a first interest rate hike. in 2022, which is faster than many market participants had previously anticipated. “
The Fed stressed that no decision has been made, but it expects it will start cutting its bond purchases by November or December and end its economic stimulus programs by next year. .
“Although no decision has been taken, participants generally felt that as long as the recovery remains on track, a phase-down process that ends around the middle of next year is likely to be appropriate,” he said. said Federal Reserve Chairman Jerome Powell.
This move could cause interest rates to rise even before the Fed raises the fed funds rate. If you want to take advantage of interest rates that are close to historic lows, you may want to consider refinancing your mortgage. Homeowners who refinance could save hundreds on their monthly mortgage payments. Visit Credible to get pre-approved in minutes without affecting your credit score.
COVID-19 could change the direction of the economy
Despite the positive outlook from the FOMC meeting, the Federal Reserve warned that COVID-19 and the spread of the delta variant could still influence economic growth and their decisions on interest rates.
“The trajectory of the economy continues to depend on the evolution of the virus,” the Fed said in its statement. “Advances in immunization are likely to continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.”
The Federal Reserve now plans to hike rates in 2022, and with the cut set to begin later this year, interest rates will likely rise.. Borrowers can take advantage of today’s low rates by taking out a personal loan to consolidate other high interest debt into a single monthly payment. Contact Credible to speak to a personal loan expert and get all your questions answered.
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