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“Fed Stands Pat: Interest Rates Remaining Steady…for Now

The Federal Reserve Board recently voted unanimously to maintain the current target range for the federal funds rate at 0%-0.25%, keeping interest rates at near-record lows. This decision was expected, as the Federal Reserve seeks to provide stability to markets still dealing with the economic impact of the coronavirus pandemic. The meeting of the Federal Open Market Committee (FOMC) focused on a range of economic data to inform the decision. Recent readings on gross domestic product, jobs, inflation, and consumer spending were all taken into account. The Fed also discussed potential changes to their communication strategy, though no changes were made to their interest rate policy. Even with the continued outlook for low rates, their decision to maintain the current target range shows that recovery from the pandemic will not be swift. The decision did come with a bright spot, however, as the FOMC upgraded its economic outlook for 2021. The Fed now expects a 6.5% increase in GDP growth for 2021 within the context of current status of the pandemic. For investors, this news is likely viewed as a sign that the Fed is committed to supporting economic growth. Low-interest rates make it easier for businesses to access capital, which allows them to invest and expand operations. For those looking to borrow, make sure to check in frequently with the news of the Fed to stay informed of any future changes to their interest rate policy. Low-interest rates may provide some financial relief to those wishing to enter the housing market or take out a loan to start a business. Ultimately, the Federal Reserve’s decision to maintain its current target range for the federal funds rate is a sign that they are taking the right steps to ensure a recovery from the pandemic. Talk of possible changes to their communication strategy is also encouraging for future economic growth.