How can you benefit from the Federal Reserve maintaining zero interest rates?

On Wednesday (April 28), the Federal Reserve refused to stop its accommodative monetary policy despite acknowledging that the U.S. economy is growing at an accelerated pace.

As expected, the Fed decided to keep short-term interest rates near zero and buy at least $120 billion in bonds each month, NBC Business Channel (CNBC) reported. The second half of the policy is a two-pronged approach to support an economy that will begin to grow strongly in 2021 on the one hand, and to support market operations while the 30-year mortgage rate remains at around 3% on the other.

Although the Federal Open Market Committee (Federal Open Market Committee, FOMC) noted that economic strength and inflation are rising, even if only temporarily, policymakers are still unanimous in their decision not to change their course. There are no signs that this situation will change soon.

Federal Reserve Chairman Jerome Powell (Jerome Powell) said that the economic recovery is “uneven and far from complete”. He also pointed out that inflationary pressures may rise in the coming months, but these “one-time price increases may only have a short-lived impact on inflation.

Powell added that now is not the time to discuss reducing the degree of policy easing (including asset purchases).

He said, “It will take some time before we see further substantial progress.” He repeated a phrase used repeatedly by the Federal Open Market Committee in its post-meeting statement.

The committee’s post-meeting statement noted that efforts to combat the COVID-19 (Chinese Communist Virus) outbreak have helped boost the economy, although more work needs to be done.

The commission said, “Vaccination and strong policy support have made progress, and economic activity and employment indicators have improved.”

However, with millions still unemployed and short of funds, the Fed said it will remain committed to its policy for now.

Greg McBride, chief financial analyst at Bankrate, said, “Economic growth is accelerating, but with unemployment still as high as 6 percent, an uneven recovery in household income and a workforce that is more than two million smaller than before the outbreak, the Fed is still keeping its valves wide open for measures. “

Although the federal funds rate is not the rate consumers pay when they take out a loan, the Fed’s move still affects the rates they see every day on borrowing and saving. The federal funds rate is the rate charged between banks for short-term borrowing.

The Fed’s borrowing rates are at historically low levels, which makes it easier to borrow money while also reducing people’s willingness to save.

Here are some ways consumers can benefit from the Federal Reserve’s near-zero interest rate policy

Refinance existing mortgages

The economy, Fed policy and inflation all have an impact on long-term fixed mortgage rates, which are typically tied to U.S. Treasury yields.

Currently, the average rate on a 30-year fixed-rate home mortgage is 3.21%, slightly above the lowest level on record.

Commenting on this, Tendayi Kapfidze, chief economist at online loan marketplace LendingTree, said, “The Federal Reserve lowered mortgage rates in 2020.” Although interest rates are now rising, they are still low enough to support the housing market.

In response, McBride said, “If you haven’t refinanced yet, there’s still time to do so.”

McBride says consumers can save themselves money if they refinance their existing debt at a lower rate. In fact, it may be the best way to free up cash.

Paying off debt

Most credit cards have a variable interest rate, which means it’s directly tied to the Federal Reserve’s benchmark interest rate.

According to Bankrate’s website, credit card rates have dropped to an average of less than 16 percent since the central bank adjusted its benchmark rate to near zero last year.

However, other short-term borrowing rates are now even lower. “Consider switching to lower-cost loans, such as using personal loans to consolidate and pay off high-interest credit card debt,” Kapferdis suggests.

“That way, you may be able to significantly reduce the overall cost of debt.”

For those struggling with college debt, McBride said, it’s a good time to look into the debt, even though the CARES Act suspended federal student loan payments until September.

When interest payments are suspended, “every dollar should be used to reduce the debt balance.”

Increase emergency savings

To be sure, low interest rates are not good for everyone, especially for savers. However, the government’s COVID dole offers a rare opportunity to shore up your finances.

McBride says, “Between relief checks and tax refunds, it’s a great opportunity to make some significant progress on your emergency savings.”

“One of the best things Americans can do right now is to increase their savings while cutting debt,” said Matt Schulz, chief credit analyst at LendingTree.

“That savings is the best way to make sure you don’t fall into a cycle of new debt as soon as you pay off your credit card debt.”

Although the Fed has no direct influence on deposit rates, these rates tend to correlate with changes in the target federal funds rate, leaving savers with virtually zero interest income.

The average savings deposit rate at some large retail banks is just 0.06 percent or less, according to the Federal Deposit Insurance corp.

But thanks in part to lower administrative fees, the average rate on online savings accounts is at least three times higher than the average rate at traditional brick-and-mortar banks.

Ken Tumin, founder of, believes that online savings accounts remain a solid option for short-term savings and emergency funds.

In fact, the epidemic has even driven the growth of digital banking, leading to more competition to offer better rates.