Market Update: Fed leaves rates near zero, pledges continued support
Quick summary of the Fed’s November meeting:
The Federal Reserve again voted to leave interest rates unchanged at its November meeting as it continues to try to boost the ailing economy, leaving the Federal Funds rate at or near zero.
Speaking at a news conference following the meeting, Chairman Jerome Powell said that while the housing market has recovered (via increased purchase and refinance activity), the recent spike in coronavirus cases makes the economic outlook “extraordinarily uncertain.” He also spoke, as he has before, of the limits of the Fed’s ability to influence the recovery and the need for additional fiscal relief, via stimulus from Congress.
“By driving rates down to near zero and providing liquidity for lending, the Fed has used just about every monetary policy tool available to fight the current recession,” said Richard Barrington, a senior financial analyst at MoneyRates.
What it could mean for you:
- Rates are still near historic lows—a boon to current and future homebuyers
- Though long-term rates are not directly connected to the Federal Fund’s rate, the Fed’s actions are helping to keep mortgage rates low. According to Bankrate, the average 30-year fixed rate mortgage is just off its record low and is currently at an average of 3.04%.
- Rates for credit cards also still near historic lows
- The Fed’s policy continues to drive down the costs for other forms of consumer lending, including credit cards. Since the Fed announced its move to near zero rates in March, credit card rates have hit a low of 16.02%, on average.
- Savers might want to shop around
- Savings accounts are still likely to earn next to nothing in interest as a result of current Fed policy. With the average savings account rate at 0.05% or even less at the largest retail banks, savers might want to consider an online savings account, which can be 12 times higher than the rate from traditional banks.
* Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors. Contact Guaranteed Rate, Inc. for current rates. Restrictions apply.