Fed Likely To Hold Interest Rates Near Zero Today: WSJ

  • Federal Reserve officials could keep the interest rates unchanged in the monetary policy meeting that concludes today, the Wall Street Journal reports.
  • Fed has acknowledged recent signs of economic weakness and kept the short-term interest rates near zero. It had launched a bond-purchase program of $120 billion a month and decided to keep stimulative measures in place until lower unemployment, and 2% inflation goals are achieved.
  • Fed officials also expect inflation to pick up in the short-term but are not backing on it to last.
  • The resurgence of COVID-19 cases in the U.S. led to steeper lockdown measures, which led to rising unemployment benefits claims and falling retails sales since November. 
  • Fed claims that the setback is temporary, and the economy is likely to bounce back later in 2021 with mass vaccine roll-out. Congress and the White House approved $900 billion in new spending measures in December, and the Biden administration has proposed $1.9 trillion in additional measures, including sending $1,400 checks.
  • The Ten-year Treasury rate is down by 1.7 bps to 1.023% on the last check, just two weeks after clocking a high of 1.187% since April 2020.
  • With low interest rates, the mortgage demand showed a dip in the last week, but the average home buyer loan size hit a record high of $395,200, CNBC reports.
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