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Fed keeps interest rate unchanged, but hints at possible cuts

Fed keeps interest rate unchanged, but hints at possible cuts

In its fourth meeting of 2019, the Federal Open Market Committee voted to keep the federal funds rate between 2.25 and 2.5%, yet also indicated it may cut interest rates for the first time in a decade.

Though the FOMC ultimately voted to uphold the current rate, this marked the first time during Jerome H. Powell's tenure as Federal Reserve Chairman that the vote was not unanimous, with St. Louis Fed President James Bullard the lone dissenter in favor of a quarter-point rate cut.

Among the 17 policymakers that sit on the board, eight penciled in an interest rate reduction by the end of the year, while another eight predicted no change and one forecasted a hike, according to updated quarterly forecasts.

A statement announcing the Fed's decision made repeated references to economic "uncertainties," removed a previous reference to being "patient" on borrowing costs and projected a larger miss of their 2% inflation target this year - all seen as hints that the Fed may cut interest rates for the first time since the financial crisis, according to Bloomberg.

"The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2% objective as the most likely outcomes, but uncertainties about this outlook have increased," the statement read in part. "In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective."

The apparent shift in monetary policy is likely attributable to the prevailing economic opinion that the current trade war between the U.S. and China is slowing the economy's momentum and the belief that rates should be loosened to spur on sluggish inflation.

When those interest rate cuts could come remains to be seen, with some investors expecting the Fed to reduce rates at its next meeting in July, and others are predicting that a change won't come until at least December.

Lower rates could open up new lending opportunities

If the prognosticators are right that rate reductions are just around the corner, it could be very good news for borrowers.

Those who hold variable-rate loans would be especially benefited by the decision. The federal funds rate strongly influences interest for personal loans, credit-card debt and variable-rate mortgages, so a lower interest rate bodes well for lower rates across the country.

A decrease in interest rates would also likely spur many consumers with fixed-rate loans to consider refinancing to take advantage of new terms.

Many Americans would be encouraged to take out new loans, as well, potentially driving an increase in home buying and other areas of the economy. Anyone applying for a mortgage or taking out a personal loan would suddenly be in a good position to leverage the lowered rates to secure a better deal for themselves.

For more information about the various types of loans available, or to get started on the application process, contact The Federal Savings Bank today.