Interest rates steady during coronavirus pandemic: What it means for your wallet
0% interest is beneficial for debt, bad for savings
Former Dallas Fed adviser Danielle DiMartino Booth, FOX Business contributor Gary Kaltbaum, senior vice president and market strategist for Vision 4 Fund Distributors Heather Zumarraga and Fitz-Gerald Group chief investment strategist Keith Fitz-Gerald provide insight into the Federal Reserve's decision to keep interest rates at zero during the coronavirus outbreak.
Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
Interest rates will remain at zero percent until the financial effects of the coronavirus pandemic begin to subside, which is good news for some consumers, the Federal Reserve announced Wednesday.
The central bank has taken a number of steps to help Americans, including some that encourage lending, but keeping interest rates at zero is another way policymakers intend to stimulate economic activity.
Here’s a look at the ways the policy affects you:
Credit card APRs
The annual percentage rates for credit cards with variable interest rates tend to move in line with the Fed’s benchmark federal funds rate.
That is good news for people who are carrying debt.
However, the decline isn’t typically significant enough to be too helpful, especially at a time when many Americans are facing serious financial challenges as a result of the coronavirus pandemic.
AS NEW YORK EYES POST-CORONAVIRUS ECONOMIC REOPENING, WILL REAL ESTATE REBOUND?
Mortgage rates
While not directly tied to interest rates, mortgage rates can be influenced by moves in the benchmark federal funds rate.
Prior to the coronavirus pandemic, however, mortgage rates were at historic lows.
Many Americans took advantage of lower rates throughout 2020 to refinance their mortgages, especially those who may need some extra cash..
Meanwhile, mortgage rates recently hit a record low. And the Mortgage Bankers Association on Wednesday reported a pick-up in mortgage purchase applications for the week ending April 24.
AFTER CORONAVIRUS SUBSIDES, WEALTHY HAMPTONS REAL ESTATE MARKET POISED FOR ‘TAKEOFF’
Your savings
On the downside, savings accounts will not be accruing much interest.
Federal Reserve chair Jerome Powell acknowledged this negative effect for savers during a press conference on Wednesday, but the central bank needed to consider the well-being of the broader economy, he said.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The Fed cut rates to zero over the course of two emergency sessions in March.
On Wednesday, policymakers said they would remain in the current range until the body is “confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the FOMC statement released on Wednesday read.
The next Fed meeting will take place in June.
GET FOX BUSINESS ON THE GO BY CLICKING HERE