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Fed announces no more rate hikes in 2019

Fed announces no more rate hikes in 2019

In its second meeting of 2019, the Federal Open Market Committee again voted unanimously to maintain the current federal funds rate at 2.25 to 2.5 percent. More notably, the Fed also indicated that the rate would remain unchanged for the rest of the year, unless economic conditions were to change dramatically.

In December, at the eighth and final FOMC meeting of 2018, the committee voted to increase interest rates by a quarter-point, raising the target range for the federal funds rate from 2-2.25 to 2.25-2.5 percent. At the time, the central bank also announced it had only two rate hikes scheduled for 2019, which was down from the three it had previously predicted in a September meeting.

Now the number has gone all the way down to zero.

The announcement should please President Donald Trump, who has previously criticized the Fed for raising rates. However, he may be less happy with the Central Bank's stated reasoning for freezing rates, which includes a projection of just 2.1 percent gross domestic product growth this year. That is lower than the 2.3 percent GDP growth the Fed previously estimated in December, and much lower than the 3.2 percent growth predicted in the White House's fiscal 2020 budget proposal, according to CNBC.

The Fed's forecast now also envisions the unemployment rate for this year reaching 3.7 percent, up 0.2 percentage points from December projections, and inflation hitting 1.8 percent, a 0.1 percentage point reduction.

"Information received since the Federal Open Market Committee met in January indicates that the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter," the FOMC's statement read in part.

Interest rates likely to become very stable, encouraging lending

The federal funds rate is the American economy's benchmark interest rate, directly impacting monetary and financial conditions and indirectly influencing short term interest rates, which lenders typically base off of the prime lending rate.

Now that the Fed has confirmed it is unlikely to raise rates at all in 2019, borrowers will finally get a break from the previous two years of rising interest rates. The news will have no impact on fixed-rate loan holders, unless they are looking to refinance, but many variable rate loans, such as credit card debts and personal loans, are strongly impacted by the federal funds rate. Consumers who have previously contended with interest rate increases on their variable rate loans should be relieved by the news that the Central Bank is signaling no more rate hikes for at least the remainder of the year.

If you have been thinking about taking out or refinancing a mortgage, auto loan or other type of personal debt, now may be the time to exploit a year-long rate freeze.

With rates likely to stabilize until at least 2020, this may be the year to take advantage of the best available rates, which should remain relatively unchanged over the rest of 2019. To get the loan process started right away, contact the Federal Savings Bank today.