During its March 2024 meeting, the Federal Reserve decided to keep its federal funds rate target range of 5.25% to 5.5% unchanged for the sixth consecutive time. This decision comes after a series of rate hikes in 2022 in an effort to control inflation, which has since started to show signs of cooling, dropping from 9.1% in June 2022 to 3.2% in February 2024. However, inflation still remains above the Fed’s target of 2%, with concerns that prices in sectors like rents, hotels, and healthcare are persistently high.
The Fed’s next steps will be based on incoming economic data, with high unemployment or a significant decrease in inflation potentially leading to rate cuts. Recent job market data has shown signs of weakness with notable layoffs in prominent companies, contributing to the Fed’s decision to maintain interest rates unchanged. Despite expectations of a possible rate decrease, the current economic trends have proved otherwise.
This decision by the Fed will have implications for both borrowers and lenders. Consumers with variable-rate mortgages, auto loans, and credit cards can expect some stability in their interest rates for now. However, businesses looking to expand are still facing challenges due to the lack of borrowing cost reductions, with interest rates remaining higher than they have been in the past 15 years. Mortgage rates around 0.25% were common after the 2008 financial crash until the onset of the covid-19 pandemic, and the continued impact of higher mortgage rates is evident in increased mortgage defaults
