In a dramatic policy pivot the Fed announced Thursday that it will allow inflation to run ‘hotter than normal’ to help support the economies bounce back from coronavirus.
This means that interest rates are unlikely to dramatically rise any time soon. This doesn’t mean that rates will stay as low as they are, but that shifts north will not be as drastic.
This will affect everything from mortgages to credit cards as well as continuing to limit the value of savings accounts. Consumers with variable rates will be happy to hear that for the foreseeable future rates will stay low.
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There could be significant downside in regards to longer term loans like the availability of mortgages as funds look for better returns as this policy will limit the advantage of long-term loans.
While rates will be low for home-buyers, will there be enough funds in the future to meet the demand? If the last few months have shown any indication, it could mean difficult times for those who do not meet higher credit standards.