Interest Rate Remained Low for Federal Reserve

This is already expected since the US Central Bank have already decided unanimously that the rate for bank lending will be kept at zero to 0.25%.

As an effect, the prime lending rates of certain commercial banks will be kept at 3.25% which is considered the lowest in the last 10 years. This is where banks base credit cards, home equity loans, and other kinds of loans. This is also brought by the banks’ attempt in encouraging borrowing and spending of consumers.

The interest rate is said to remain unchanged for an extended time as it was being signaled by the said commentary accompanying the decision. When it comes to the inflation, the US central bank is not really worried. According to the commentary, continuous pick up of the economic activity will go on and the financial markets conditions with remain unchanged. In addition, housing activity will rise and the expansion of household spending will continue. Though these can be somewhat positive, they are still affected by the ongoing job losses, sluggish growth of income, and tight credit with lowered housing wealth.

A plan to inject about $1.25 trillion into the economy is also planned by the bank by the first quarter of 2010. But it still depends on the pick up of the economy if it will go slow of fast. In this case, the time set may change.