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Fed Leaves Rates Alone...

The federal funds rate remains at 0% to 0.25%, and the prime rate remains 3.25%. Home equity lines of credit and some credit cards are linked to the prime rate, and their rates will remain unchanged. The Federal Open Market Committee decided to keep rates at these low levels to promote economic growth.
Last year, the Fed announced that it would buy $500 billion worth of mortgage backed securities to keep mortgage rates low. Today, the Fed said that it is ready to spend even more than that in an effort to provide support to the mortgage and housing markets.  The initial reaction was the opposite of what the Fed intended, as mortgage bond yields went up slightly.

Long term rates such as those for mortgages, don't respond directly to the Fed's short term rate moves. In certain instances, mortgage rates move upwards when the Fed reduces the federal funds rate.

The federal funds rate is the interest rate for banks borrowing reserves among themselves. The discount rate is the interest rate that the Fed charges banks to borrow reserves from the Federal Reserve.

Federal Reserve 101


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