The Fed keeps rates near zero — here’s how you can benefit

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    asset management news magazine

    People walk past the Federal Reserve building on March 19, 2021 in Washington, DC.Olivier Douliery | AFP | Getty Images

    The Federal Reserve said Wednesday it will keep its benchmark interest rate near zero to continue to support the economic recovery from the coronavirus pandemic.

    It’s been over a year since the central bank slashed its benchmark overnight lending rate. The Fed also instituted a series of programs to keep credit flowing when the pandemic shut down the economy.

    Now the economy is gaining steam, bolstered by fiscal and economic policy, as well as the growing numbers of people vaccinated against Covid-19. 

    But with millions of people still out of work and cash-strapped, the Fed said it is sticking with its policies for now.

    “Economic growth is kicking into higher gear, but with 6% unemployment, an uneven household recovery and more than 2 million fewer Americans in the labor force than prior to the outbreak, the Fed is keeping the throttle wide open,” said Greg McBride, chief financial analyst at Bankrate.com.

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    Although the federal funds rate, which is what banks charge one another for short-term borrowing, is not the rate that consumers pay, the Fed’s moves still affect the borrowing and saving rates they see every day.

    The Fed’s historically low borrowing rates has made it easier to borrow money — while also making it less desirable to hoard cash.

    Here’s how consumers can take advantage of the Fed’s near-zero rate policy while it lasts.

    Refinance a mortgage

    The economy, the Fed and inflation all have some influence over long-term fixed mortgage rates, which generally are pegged to yields on U.S. Treasury notes.

    Currently, the average 30-year fixed-rate home mortgage is 3.21%, up slightly from its record low, according to Bankrate. 

    “The Fed drove mortgage rates lower in 2020,” said Tendayi Kapfidze, chief economist at LendingTree, an online loan marketplace. Although rates are now rising, they are still low enough to support the housing market, he added.

    “if you haven’t yet refinanced, there is still time to do so,” McBride said.

    Consumers can save themselves money if they refinance existing debt for