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Fed Forecast: Low Rate Ahead. Insights for You

Read This: Fed Forecast: Low Rates Ahead. Here Are Insights You’ll Want to Know.

The Federal Reserve at its most recent meeting recommitted to keeping short-term interest rates near zero for the foreseeable future, which likely means into 2023 or 2024.

The Fed is also “all in” to do whatever it takes to support the economy. It has said that it will be willing to tolerate inflation above 2% for a time. That means that the Fed will not raise short-term rates even if inflation begins to pick up. But if inflation rises strongly later on, the Fed would likely respond.

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Despite the Federal Reserve’s latest commitment to low short-term interest rates and easy-money policies into 2023, long-term rates are rising on continued inflation fears. Expectations of a strong economy this year and the government’s third stimulus package are pushing up 10-year Treasury note yields. Yields have been on an uptrend ever since the second stimulus package passed in December. With control of the Senate, the House of Representatives and the White House, Democrats are in a position to pass even more spending legislation, such as proposals to target infrastructure and climate change. Any boost to economic growth tends to push up interest rates, as the demand for funds grows and inflation possibly rises, as well. Larger budget deficits will also raise rates as the supply of government debt offered to investors grows.

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