The federal reserve and interest rates
Updated: Feb 6, 2021
On Wednesday, January 27th, the Federal Reserve kept near zero interest rates and promised to continue buying bonds. For those confused, here is some background. The Federal Reserve is the central banking system in the United States that regulates monetary policies for the betterment of the United States economy. One of the main duties the Fed has is regulating interest rates. Investopedia defines interest rates as, “the amount a lender charges for the use of assets expressed as a percentage of the principal.” Currently, rates are near zero meaning it is easier to borrow money. Because of COVID, interest rates have been near zero since March of 2020. With rates being so low, this allows people to borrow money cheaper to spend on bigger purchases, like cars or homes. This is all part of the Feds plan to try and help boost the economy. In the Feds meeting on Wednesday, they mentioned, “The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic.” Interest rates are expected to remain near zero for an unprecedented amount of time, not knowing when COVID will stop having an impact on our economy. One sector the low interest rates have helped was the housing market, smashing records in 2020. With interest rates being low, now is a good time to talk with your financial advisor.