Interest Rate Hike Postponed By Fed, Yet Again
On Wednesday July 29, 2015, the Federal Reserve (“Fed”) issued a statement hinting at its intent to raise the target interest rate in the near future – presumably during its next scheduled meeting in September of 2015. On Thursday, September 17, 2015, however, the Fed issued another statement announcing its decision to hold off, yet again, on raising the target interest rate.
Concerns regarding China’s economy likely played a significant role in the decision to keep interest rates stable. In its announcement, while the Fed noted moderate expansion of economic activity, including continued growth in the labor market, it cited “[r]ecent global economic and financial developments” that will “restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term”. In order to foster continued growth, the Fed “reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate” and indicated it will continue to monitor inflation and unemployment in determining when it is appropriate to raise the target interest rate.
The announcement is good news for buyers looking to secure low-interest loans, and is also good news for sellers, who may have been expecting an interest rate hike to damper recent increases in housing prices. How long the continued low interest rates will last is unknown, but it’s fair to say that the days of record-low interest rates have lasted much longer than most expected. Indeed, the expectation at the beginning of the year by many experts was that the target interest rate would increase by at least 0.5% by the end of the year. At the current rate, it is unlikely that the end of the year will see an increase of more than 0.25%.
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