the interest rates will not rise this year. The Federal Reserve, once unpredictable, has announced a set of concrete criteria that it will follow in order to raise the interest rates. The two criteria are unemployment rates and inflation rates. This gives financial analysts the ability to predict the Federal Reserve’s actions in an unprecedented way.
Specifically, the Federal Reserve states that it will wait for the unemployment rate to decrease to 6.5% or lower (currently at 7.7%) and the inflation rate to rise to 2.5% (currently at 1.8%). These criteria allow the country to continue to grow economically and for individuals to strengthen themselves financially before the interest rates are increased in order to pay off national debt.
Additionally, the Federal Reserve is expanding its stimulus, buying $45 billion in treasuries and $40 billion in mortgage backed securities monthly.
There are three major factors that have helped lid the interest rates:
1. Inflation and economic growth in the US has been growing steadily at moderate levels.
2. Heightened demand for “safe-haven” investments.
3. Non-price sensitive buyers still continue to buy US treasuries.
All things considered, it doesn’t appear that the interest rates will rise by 2013. 2014, however, is a completely different situation that is impossible to predict at this time.
Sources: Investor’s Business Daily
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