Federal Funds To Hold Close To Zero Through 2022

In a press release sent out on June 10, 2020, the Federal Reserve announced it would keep the federal funds rate close to 0% through 2022. The benchmark rate is currently 0% to .25% and the central bank plans to “deploy policy tools to underwrite an emerging recovery for the U.S. economy from the COVID-19 pandemic.”

As the U.S. economy recovers from the COVID-19 pandemic, home building and housing, in general, will be the leading factor in the economic recovery. So far this is foreshadowed by the reports of gains for mortgage applications over the past two months and rising newly-built home sales.

The Fed also discussed the course of actions it will keep doing to support low mortgage interest rates and housing demand. For the time being, they will continue their quantitative easing policy. This means the Fed will purchase $80 billion in Treasuries and $40 billion in mortgage-backed securities every month.

The housing industry looks strong and has a promising future for the next several years. In fact, the Fed forecast a strong bounce back with annual growth at a 5% rate for the year 2021. With the rates near zero, the home building and housing markets have a great two years ahead of them. The Federal Reserve is ensuring there is credit available for households and businesses during these uncertain times. The Fed states they will, “do whatever it takes to return labor markets and the economy to where they were prior to the outbreak of the pandemic.”

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