The Federal Reserve concluded its two-day Governor’s meeting earlier this week, and Chairman Jerome Powell was available to speak to the press immediately afterward. The central bank is remaining dovish on the economy, and guiding interest rates are likely to stay the same.
Here are the biggest points to take away from the conference.
The Fed Will Remain Dovish Until Growth is Stronger
America’s economy is expanding, but it’s still nowhere near where it was before the pandemic. The Fed is choosing to stay dovish on growth. Powell noted that 465,000 jobs were added to the economy in February in the private sector, and he called it a “nice pick-up” while also noting that it could go much higher.
Powell was reluctant to say when the Fed would become more aggressive in its fiscal policy, telling reporters that there’s no way to determine how or when the economy and employment would grow at a faster rate.
For investors, this isn’t exactly bad news. The Fed is being conservative and that could introduce some stability into the wider financial markets.
Europe Won’t Impact America’s Economy
In Europe, the economy is recovering at a slower rate when compared to America. Following the Great Recession between 2007 and 2009, Europe’s slow economic recovery had a direct impact on America. Powell doesn’t expect that to be the case this time around, noting that the U.S. is in a much stronger position than it was then.
With some recovery in manufacturing and service-based industries, he’s likely right, and this is another point that investors can take confidence from.
The Fed Interest Rate is Unchanged but Real Rates are Rising
The Fed will hold the funds rate at 0.00% – 0.25% and hasn’t indicated that it will change its position in the next quarter. However, real rates for consumers and businesses are rising. Lenders believe that there’s enough confidence in borrowers to support higher rates.
For investors, home buyers, and even those looking for credit, this news isn’t positive. Mortgages will become more expensive, as will auto financing and other loans. Anyone considering buying a home this year should move forward quicky, because lending rates are only likely to increase as the economy gains traction.
Overall, the Economy is in a Good Position
The Fed’s dovish attitude might not appeal to those who are looking for unbridled optimism, but it’s likely the smartest position that the central bank can take at this time. The recovery is underway, but it’s uncertain how long it will take for America to get back to where it was in March of 2020.
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