Federal interest rates news
What does the Federal interest rates news mean for us
As of last Tuesday, the current Federal interest rates news showed that the benchmark interest rates have remained unchanged. Currently the benchmark rate is unchanged at 0.25%. Since the economic recovery is not gaining strength as has been expected in the past couple of months, the Federal Open Market Committee has said that the recovery has been painfully slow. The factory output has increased but not as much as it should have and the unemployment levels are still quite high.
The Federal interest rates news also indicates that the expenditure by the household has increased. However the factors of tight credit, high unemployment, and lower housing wealth have had a negative impact on the household expenditure.
This news also suggests that the federal funds rate would be maintained at 0.0% – 0.25% for a prolonged period as well. Since the recovery and the economic outlook will continue to be monitored, the interest rates will be lower. Following such announcements, the US Dollar has gone down against the major currencies of the world. Other currencies have become stronger as compared to the US dollar.
The primary objective of the Fed or the central bank is to ensure that there is price stability. When there are high interest rates in the economy, this will be an incentive for the foreign investors. These investors would be looking for a risk free return on their investments through the higher interest rates. When this happens, the dollar demand increases and pushes up the currency of the US in relation to other currencies in the world. On the other hand, when the interest rates fall, then the demand for other currencies gains more momentum and this makes the dollar weaker in comparison to other currencies.
Federal interest rates news and funds rate
The federal funds rate will continue in the range of 0%-0.25% and will remain at that level for a period of few months. Also the Federal Reserve Bank will purchase the treasury notes in order to balance against the mortgage holdings and the treasury holdings that have matured. The central bank may also buy billions of dollars in bonds if they believe that it will be beneficial for the economy. However as of now, this step is not considered to be important and that it should be taken.
Inflation at this point is considered to be low, however if it gets really low, then it can lead to higher unemployment as well.