Close spiff

Ready to see how much house you can afford?

A Resource For Home Buyers

We want to be a one-stop home buying resource for you, and one way we’re doing this, is by providing helpful tips and information about the mortgage industry, buying and selling your home – and many other useful topics that you’ll likely encounter on your path to home ownership. We’re confident that you’ll learn something new every time you visit this page.

FOMC announces federal funds rate is not changing

FOMC announces federal funds rate is not changing

In its last meeting of 2019, the Federal Open Market Committee (FOMC) voted to maintain the federal funds rate in a target range of 1.5% - 1.75%. The committee has decreased the rate three times this year, but plans to keep it the same in 2020. When the policy body last met in September, more than half of the Committee predicted that there would be at least one rate hike over the next year. Now, only four members are still anticipating a federal funds rate increase in 2020, but only by one quarter-point.

The labor market is strong

In the FOMC statement, it was announced that "the labor market remains strong and that economic activity has been rising at a moderate rate." It noted that unemployment rates have stayed low and that job gains have remained solid, on average, in the past couple of months. Household spending has steadily increased as well. The Committee has high hopes for the end of 2019, projecting a 2.2% increase in gross domestic product.

Inflation is low

The Fed considers 2% inflation healthy for the economy. However, inflation has been below that for the past year. Though there have been possible solutions to this problem discussed among members in previous meetings, the FOMC's most recent statement did not detail any new specific strategy to combat inflation at this time. Instead, the Committee maintains that its current monetary policy will work to eventually bring inflation closer to the goal of 2%.

Why the federal funds rate did not change

Besides inflation, the functions of the economy are operating historically well. The FOMC's decision to keep the federal funds rate between 1.5% and 1.75% is mainly to support the current state of employment and price stability. The Committee will continue to monitor economic data, particularly the percentage of inflation, to see if a rate hike is necessary in the upcoming months.

Home loan payments will remain the same

When the federal funds rate rises, banks and mortgage companies have to pay more to borrow money from one another. These higher costs trickle down to the consumer level, so borrowers have to pay higher interest rates on loans. However in this case, when rates are maintained at the same rate, those who are currently paying off an existing mortgage will not experience any change in their monthly mortgage payments. Even with a variable-rate loan, interest rates should stay the same. Since the FOMC is not predicting any rate hikes in the upcoming months, now is a good time to obtain a home loan.

If you're planning on buying a home and want to inquire about a loan, contact the Federal Savings Bank today.