Janet Yellen leaves rates unchanged at 1.25 to 1.5 percent

Janet Yellen leaves Fed rates unchanged and this is her last meeting as Fed Chair.

As you may know, banks lending rates are impacted by the Federal Reserve’s cash rate decision. If the Fed increases its official cash rate (Federal Funds Rate) it will increase bank’s borrowing costs. If banks borrowing costs increases, they will onpass the cost to lenders in the form of higher mortgage interest rates.

Although the Fed regulates US interest rates, as one  of the world’s biggest economies, it impacts AU and NZ banks because Au and NZ banks increasingly source funding from overseas.

According to projections released in December, officials expect three rate hikes this year so long as there is no significant disruption to market conditions. The Fed is expected to continue on the same path Yellen set once Jerome Powell (the new Chair) takes over.

So far, we have yet to see interest rates return to the pre-GFC level of 8% but we should be careful when taking on future debts that the cost of borrowing may rise in the future.

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