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Fed: No Change in Interest Rates Until Economy Recovers

The Federal Reserve announced that interest rates will remain at 0 to .25% “until it is confident” the economy has recovered from COVID-19 and on track to achieve maximum employment and price stability. 

The Fed also announced over the coming months that it will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities “at least at the current pace” to sustain smooth market functions. 

“The Committee will closely monitor developments and is prepared to adjust its plans as appropriate,” the Fed said. 

According to projections by the Fed, it does not project for interest rates to rise above 1% until 2022.

In March, the Fed dropped interest rates to zero in an emergency measure to combat the immediate effect of the coronavirus. 

First American Financial's Deputy Chief Economist Odeta Kushi said the Fed is following through on their commitment to "do anything it takes for as long as it takes" to mitigate the impacts of COVID-19, including policies that impact the mortgage markets.

“The Fed is a gigantic ready-buyer in the secondary market, generating demand that increases MBS prices and lowers yield for investors—this results in lower mortgage rates," she said.

George Ratiu, realtor.com's Senior Economist, echoed Kushi's statement, saying the Federal Reserve "remains committed" to providing liquidity to the financial system and the economy.

"Maintaining the current pace of mortgage-backed securities purchases is a welcome sign, indicating that well-functioning real estate markets are a priority as we move into the recovery phase. The current recession was initiated by a clear decision to close business activity to ensure the health and safety of Americans. Providing a bridge across the shutdown crevasse in the form of financial liquidity is paramount to regain the trust and financial ability of buyers and sellers to return to a functioning housing market," he said.

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.
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