Fed Leaves Interest Rates Untouched, Consumers Keep the Status Quo

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Fed Leaves Interest Rates Untouched, Consumers Keep the Status Quo The Federal Reserve announced Wednesday that it would leave interest rates unchanged -- for now. For consumers, that means something of a holding pattern for the near term, with little impact on borrowing. By end of summer, that could be different.

"Inflation appears to have leveled over the last couple of weeks, and the present state of the economy is pretty soft at the moment," Keith Gumbinger, vice president of mortgage research firm HSH, told DailyFinance. "But I expect it to show somewhat more signs of life as the summer progresses, and rates will start to nudge up as a result."

The Federal Funds Rate, the overnight rate the government offers for short-term loans to major financial institutions, remains unchanged at between zero and 0.25%, where it has been since December 2008. Any change in the Fed Funds Rate would have an immediate effect on the prime rate, which banks charge large corporations for short-term loans, which in turn impacts consumer mortgage borrowing and other major financing rates.

For potential home buyers, this is good news. Home loan interest rates will stay low in the near future. "Mortgage rates are quite fantastic right now, and unlikely to remain there in perpetuity," Gumbinger said. "It's a good time to make a move for a purchase or refinance, if you can." (Read also Renting Versus Buying)

"The consumer will really see no change in their situation from the Fed's announcement, which was well anticipated," Brad Sorensen, director of market and sector analysis for Charles Schwab, told DailyFinance. "Unfortunately, savings rates will continue to be extremely low, but mortgage rates should also stay relatively low."

Credit card holders are unlikely to face interest rate hikes soon either, according to CreditCards.com. The majority of cards and offers are for variable interest rates based on the prime rate, which has not changed.
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