The Federal Reserve, responsible for managing the U.S. economy, has once again kept interest rates steady. This announcement was made after the Fed’s January meeting, when the swell of inflation caused by the coronavirus pandemic had cooled.
The Fed’s decision should come as good news to both the average consumer and the business world. Low-interest rates, if maintained, could keep inflation from spiking too high but would also maintain more affordable borrowing options.
The Fed is in a difficult position. On the one hand, it must take steps to protect consumers from the financial shock that a recession brings. On the other, it must also monitor inflation levels and ensure that inflation remains within a sustainable range. Since March 2020, the Fed has held interest rates at near 0%.
The steady interest rates could also help the economy recover from its current downturn. Low-interest rates make it easier for businesses to borrow money to buy equipment, grow their workforce, or diversify their offerings. The Fed’s decision will also give the real estate and housing market more time to recover, as low-interest rates attract more buyers.
Ultimately, the decision to maintain interest rates was wise. More than a year into the pandemic, the economy is still fragile and a gradual, steady approach is necessary. The Fed must now ensure that inflation remains in a sustainable range, while also ensuring more affordable borrowing costs. Mayor-term efforts must also be taken to protect consumers in the event of another recession. In this environment, the Fed’s decision to keep interest rates steady was the right choice.