The Fed and Interest Rates

Last week the Federal Reserve (the Fed) had met and decided to leave their Federal Funds Rate unchanged at 0.0% – 0.25%.  They also had mentioned that they expect the rate to stay at this level through 2022.  The Fed Funds Rate, in a nut shell, is the rate banks use to lend money to one another.  The lower the rate, the cheaper it is to borrow and the more stimulating for the economy, as money is “cheaper”. 

Even though lower Fed rates point to higher inflation, the Fed surprisingly said last week that they predict no inflation for 2020, around 1.5% inflation levels for 2021 and under 2% inflation for 2022.  Lower levels of inflation point to lower longer term interest rates. If they are predicting lower levels of inflation, that could be a good indicator for lower rates going forward.  On top of low levels of forecasted inflation, the Fed has also been purchasing over $20B a week in mortgage backed securities.  This is also very much helping interest rates stay low and aids home buyers’ affordably and homeowners’ refinance potential. 

Call your Advisors Mortgage Loan Officer today to discuss the current market in more detail and to learn what you qualify for.