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Federal Reserve Leaves Interest Rates Unchanged |
The Federal Reserve voted today to keep the Fed Funds interest rate unchanged at <.25%. This unprecedented low rate, which is essentially zero, has been in play for months now, while the US economy has still shown signs of continued sluggishness.  The move came as no surprise to the markets, where the Fed Funds Futures have for weeks put the chances of a rate increase at zero.
Despite many moves over the past six months, the Fed has had little success in boosting an ailing economy held underwater by failing banks, declining real estate and general overall market fear.
Although the move is considered negative for the US Dollar, the fact that no move is a foregone conclusion means the dollar isn't likely to be weakened much on the announcement. More important is any language in the FOMC statement that gives an indication of what will happen at the next meeting.
The statement said that contraction is slowing, which is a good sign for the US economy and the US Dollar. But the committee also warned that consumer spending is too slow.
The Fed also reported it will purchase $1.25 trillion in mortgage-backed securities and another $300 billion in treasuries, which should keep yields low.
So eyes will now turn to August 12 when the FOMC again meets to determine whether to raise rates or leave them unchanged.
While the Fed Funds rate remains historically low, mortgage rates have risen slightly of late, as investors have lost an appetite for mortgage-backed securities while construction and real estate has remained in decline. Learn more about What Drives Mortgage Rates.
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