Fed likely to hold down rates for 5 years or more

Fed likely to hold down rates for 5 years or more

| August 28, 2020
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The Federal Reserve is expected to hold short-term interest rates close to zero for the next five years and possibly longer, as well as adjusting its approach to inflation under a new monetary policy strategy. The new inflation policy is expected to be more flexible, allowing it to rise occasionally above 2% to compensate for periods when it falls below that target.
 
What does this mean for you? It could mean that lower mortgage rates as well as rates for consumer loans such as student loans, credit cards, and home equity lines of credit will stay lower. In fact, it’s possible that loan rates could still go down a bit more.
 
It also means that investment returns on bonds might also stay lower for a while as governments and companies don’t need to pay very much in interest to borrow money. That means lower returns to you from your bond fund holdings as well as interest rates at the bank on your cash and money market funds.
 
It may also mean that the stock market maintains higher returns as this is the only place to earn money on your investments.
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