Want To Remodel? Buy A Car? You Still Have Time To Get A Cheap Loan
Planning to squeeze cash out of your house this spring to do some remodeling?
You can relax a little. Interest rates on home equity loans, credit cards and car loans are likely to stay low for a while longer.
That's because the Federal Reserve Board's policymakers ended their meeting Wednesday without raising the benchmark short-term interest rate. If the benchmark had risen, then your borrowing costs probably would have been pointing higher too.
But you should be OK for now.
In fact, members of the central bank's Federal Open Market Committee might continue to hold down interest rates for a good while longer to help prop up the economy.
Jobs and incomes are improving, but still, "growth in economic activity appears to have slowed," the Fed said in a statement released at 2 p.m. EDT. "Business fixed investment and net exports have been soft."
So the Fed will keep its benchmark federal-funds rate at its present low range of between 0.25 percent and 0.50 percent. The next meeting is set for June 14-15.
Here's the back story:
Fed policymakers can push up, or tamp down, interest rates to try to keep the economy on course for steady growth.
If they think the economy is faltering, they can hold down key interest rates to stimulate more borrowing for business expansions, car loans, home-equity loans and more. But if they see inflation heating up, they can raise rates to discourage borrowing, and that in turn can restrain wage and price increases.
After the Great Recession ended, the Fed kept saying it would like to see inflation running at about 2 percent a year. But inflation kept coming in below that target, so there was no need for the Fed to battle price increases. Instead, it held rates down at historic lows.
Then back in December, the Fed thought it might be seeing some hints of inflation so it nudged up its benchmark rate by a quarter point. And a lot of economists predicted that would be the first in a series of four rate hikes spread out over a year.
But that pace now looks unlikely. "Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports," the Fed said Wednesday.
Last month at a press conference, Fed Chair Janet Yellen said she was "wary" of wintertime data, which could be distorted by seasonal events.
But now it's springtime, and it's still clear that inflation is tame and growth isn't great, thanks to the sharp downturn in China and other parts of the world. So for now, the Fed will continue to restrain interest rates.
The Fed said it expects growth to be slow enough that conditions "will warrant only gradual increases" in interest rates.
Jason Pride, director of investment strategy at Glenmede, said he expects the Fed to resume nudging up rates later this year, but at a pace that is "very slow: We expect one, maybe two rate hikes this year."
Chris Gaffney, president of EverBank World Markets, agreed. "Looks as if we will continue with the 'slower growth, lower rates for longer' scenario."
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