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Federal Reserve Keeps Interest Rates Unchanged

The Federal Reserve and chairwoman Janet Yellen decided to hold the line on a raise in in interest rates.
The Federal Reserve and chairwoman Janet Yellen decided to hold the line on a raise in in interest rates. Photo Credit: Wikipedia.org

WESTCHESTER COUNTY, N.Y. -- The Federal Reserve left key interest rate unchanged on Thursday, citing global problems and low inflation.

The decision was one of the most anticipated by The Fed recent years. Interest rates set by the Fed have not changed appreciably since 2008.

In its policy statement, the Federal Open Market Committee said an interest-rate increase will come after “some further improvement in the labor market” and when officials are “reasonably confident” inflation will move back to the central bank’s 2 percent annual target.

Fed chairman Janet Yellen said she still anticipates raising interest rates this year, despite recent uncertainty in global economies and financial markets. She said the The Fed still expects moderate GDP growth, continued reduction in slack in the labor market and inflation remaining below target for the next several years.

"A month ago if you had told me interest rates would not be changed, I would've been floored,'' said Leah Caro, Bronxville Real Estate President and President of the Hudson Gateway Multiple Listing Service. "But after seeing the stock market volatility, I'm a little less surprised."

The interest rate set by the Fed is one consideration that often impacts the purchase of real estate.

“People need to understand that the rate you pay for the average home mortgage is different from the fed funds rate,’’ said Joe Rand, Managing Partner of Better Homes & Gardens Rand Realty. “Home mortgage interest rates are affected more by the general state of the economy and Wall Street's expectation for inflation. Right now, the economy is stable but not surging, so investors are not looking for higher returns on home mortgages. And, of course, the Fed sees that same low-inflation, flat economy environment, so they didn't see a justification for raising rates.”

"Interest rates are low, and have been low,''" said Gregg Wagner, regional vice president for Coldwell Banker Residential Brokerage in Connecticut & Westchester County.. Even if they had raised it, rates are still at historic lows. We’re happy they didn’t, but if they did, I don't’ think it would have that been influential on the market."

The Fed did upgrade its outlook for the economy with a projected growth of 2.1 percent, an increase from its previous projection of 1.9 percent. Unemployment has also fallen, down to 5.1 percent after reaching 10 percent in 2009.

“I think it's only a matter of time before rates creep up,’’ Rand said. “In the short term, that will drive some increased activity in the housing market, as buyers rush to get into contract before rates go up too much. In the long-term, rates will only go up if the economy improves, and if the economy improves we are likely to see a healthier housing market that will be able to overcome the dampening effects of higher rates.”

Caro said she was disappointed rates did not rise. "The specter of interest rate increases has been hanging over our heads for two years,'' Caro said. "We were looking forward to a slight increase to create some urgency. Interest rates can only go up. It's just a matter of time."

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