Rates Stay Near Zero Due to Fragile Recovery

The Fed has determined that rates will stay close to zero for several years to come due to the long recovery ahead from the pandemic. The key short-term rate was close to zero after the latest Federal Reserve policy meeting last Wednesday.

American consumers and businesses are struggling because of COVID-19 and will continue to struggle if Congress, the White House and the Fed do not do more to help stimulate the country’s economy.

The Federal Reserve has already slashed the interest rates and started many lending programs as well as other stimulus efforts to support the national economy. It will continue to buy Treasury bonds and mortgage-backed securities.

“Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year,” the Fed said in its statement.

The Fed believes that the course of the virus can determine the path the economy will take. There is hope from the American people with the COVID-19 vaccines becoming available. People will begin to go back to normal spending habits and activities.

The country’s gross domestic product is anticipated to a 4.2% rebound next year. The Federal Reserve also predicts the unemployment rate will go back down to 5% in the year 2021.

“With vaccines on the horizon, the Fed’s economic projections for the next few years all got an upgrade, but don’t gloss over the immediate challenges still confronting the economy,” said Bankrate chief financial analyst Greg McBride in a report after the Fed announcement.

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