The Federal Reserve wrapped up its July monetary policy meeting Wednesday with the announcement that it will keep the federal funds rate at its targeted 0% to 0.25% range.
"With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen," the Federal Open Market Committee (FOMC) said in its post-meeting statement. "The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered. Inflation has risen, largely reflecting transitory factors.
"Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses," the statement continued.
Interest rates across many industries follow the direction of the federal funds rate and are therefore impacted by any changes to it. Mortgage rates, for example, are at historic lows, making it a great time for homeowners to refinance and save hundreds on their monthly payment. Visit Credible to find your personalized lower interest rates in minutes.
Currently, the Federal Reserve is holding the federal funds rate low after cutting it at the onset of the coronavirus pandemic in March 2020 to spur economic activity. This is keeping interest rates that follow it – like rates on home loans, student loans, credit cards and personal loans – down and has led to an increase in lending activity.
Inflation is currently surging well above the FOMC’s benchmark of 2%, with the latest increases hitting 5.4%. However, Federal Reserve Chair Jerome Powell said these increases are temporary and drop as the economy recovers. Powell said the Fed will not raise rates until inflation reaches the 2% goal over the long-term average, and added that the Fed wants to see "substantial further progress" toward full employment before moving rates.
Many Americans can benefit from these low rates, such as student loan borrowers. By refinancing their student loans, borrowers can take advantage of historically low rates to save on their monthly payment. Visit Credible to compare multiple rates at once and pick the lender that fits you best.
In terms of the labor market, the average change in real earnings decreased for all workers, according to the U.S. Bureau of Labor Statistic's latest Real Earnings Summary report. Real hourly wages dropped 0.5% from May to June and on an annual basis, real average hourly earnings decreased 1.7% across all occupations.
"In their July statement, the FOMC recognized the strengthening economy, including a faster pace of inflation," Mortgage Bankers Association Chief Economist Mike Fratantoni said in a statement. "However, they still expect that this level of inflation will be transitory. Holding to their prior stance, their comments indicate that short-term rates will stay at zero until we get much closer to full employment."
You may want to consider taking out a personal loan if you're struggling to make payments amid the rapid price increases. Personal loans are affected as the Fed keeps rates low, and you can to take advantage of interest rates that are at all-time lows. Visit Credible to get prequalified in minutes without affecting your credit score.
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