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FOMC keeps rate stable, commits to broad response

FOMC keeps rate stable, commits to broad response

In its sixth meeting of 2020, the Federal Open Market Committee (FOMC) voted to keep the federal funds rate stable between 0 and 0.25%. Nothing big was expected from the July 28-29 meeting, as interest rates are already near zero following the onset of the COVID-19 pandemic.

However, in its statement announcing the decision, the FOMC warned against persistent future risks to the national and global economies brought on by the pandemic.

COVID-19 impacts will 'weigh heavily'

The FOMC vote was unanimous, and also indicated the Fed would continue to operate stimulus programs like asset purchases and credit injections.

"We are committed to using our full range of tools to support our economy in this challenging environment," Fed Chairman Jerome Powell said, according to CNBC. Powell added that there could be a long road ahead, including additional fiscal policy and continued support for Americans experiencing job loss. He also said the gross domestic product (GDP) contraction seen in Q2 could be the largest ever.

While policymakers and the populace had hoped for a swift economic recovery, surging case numbers across the U.S. have dealt significant setbacks to the recovery and planned state-by-state reopenings.

In the Fed's assessment, the outbreak and steps employed to address it have led to a number of negative impacts on the domestic economy.

"The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses," the FOMC statement read. "Weaker demand and significantly lower oil prices are holding down consumer price inflation. 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."

One piece of good news is that stimulus measures have led to somewhat improved financial conditions and an increased flow of credit to American households and businesses.

How the rate decision could impact you

Increases and decreases in the federal funds rate can affect the rate you are quoted for a loan or credit card. With rates at near zero, the Fed is trying to stimulate economic activity to support growth and recovery.

The decision has had a major impact on mortgage rates, which hit several new record lows in July 2020. According to Freddie Mac, average interest rates nationally* for the week ending July 23 were:

3.01% for a 30-year fixed-rate mortgage
2.54% for a 15-year fixed-rate mortgage
3.09% for a 5/1 adjustable-rate mortgage

Average interest rates for a 30-year fixed-rate mortgage briefly dipped below 3% for the first time ever in July.

Interested in taking advantage of the current low-rate environment? Visit The Federal Savings Bank today to begin your online mortgage application.

*These are nationally average rates and may not be available for all customers of The Federal Savings Bank. Terms and conditions apply. Subject to underwriting approval.