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Fed reaffirms its decision to hold rates steady

Fed reaffirms its decision to hold rates steady

In its third meeting of this year, the Federal Open Market Committee unanimously upheld its March decision to keep the federal funds rate between 2.25 and 2.5%. The Fed signaled once again that it doesn't plan to cut or raise the rate in the coming months.

The FOMC cited low inflation despite economic vitality as the basis for its decision.

"Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Growth of household spending and business fixed investment slowed in the first quarter," the Fed said in its official statement. It added, "On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent."

The economy outperformed most economists' expectations for Q1, according to CNBC. Despite forecasts for little to no growth, the GDP rose 3.2%. Meanwhile, the unemployment rate has held at 3.8%, its lowest point in 50 years.

Nevertheless, with inflation still below its 2 percent target rate, the Fed has chosen not to blink, despite pressure from President Donald Trump to lower rates by as much as a full percentage point.

Steady rates could signal new lending opportunities

In an attempt to keep the interest rate nearer to the middle of its range, the Fed also reduced the interest it pays banks on excess reserves by 0.05 percentage points, down to 2.35% according to CNBC.

This effort paired with the expectation of continued stability in the coming months - and likely for the rest of 2019 - is good news for borrowers. It represents a reprieve from two years of rising rates, and a window of opportunity for consumers with fixed-rate loans to refinance.

Borrowers with variable-rate loans have the most to get excited about. The federal fund rate strongly influences interest for personal loans, credit-card debt and variable-rate mortgages. Stability on the horizon bodes well for low rates, at least through 2020.

Until then, anyone considering applying for a mortgage, taking out a personal loan or refinancing an existing one may be in a good position to take advantage of the rate freeze.

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