COVID-19 has led to the largest shock to the U.S. economy in our lifetime. The Federal Reserve, Treasury, and administration have responded with trillions of dollars in stimulus measures to help underwrite, or carry, the economy through this pandemic — and more is coming.
As the Fed has eluded to, they will be keeping the overnight Fed Funds Rate at zero. So rates on short-term loans (credit cards, cars, and home equity lines of credit) will remain historically low for the foreseeable future.
The Fed also indicated they will do “whatever it takes” to keep long-term rates relatively low. So how did the markets respond? Over the past weeks virtually everything traded higher. Many stocks are at all-time highs creating a positive wealth effect for many Americans. States and their economies continue to re-open putting millions of Americans back to work. Recent economic damage will take a while to fix, so expect further government response
Looking ahead: Inflation will be a concern down the road as the economy begins to recover. If inflation does rise, home loan rates will rise too.
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