interest rates Consumers should soon see benefit of Fed’s patience

Associated Press

NEW YORK

So much for those worries about rising interest rates.

Just a few months ago, rising rates were bearing down on everyone from home buyers to stock investors after the Federal Reserve put through seven quarter-point increases in 2017 and 2018.

This year, the Fed has changed course.

In January, it opened the door to a “patient” approach to further rate increases.

Then on Wednesday the central bank surprised the market when it said it may not raise rates at all during 2019.

The move – or anticipated lack of moves – reverberated immediately through the bond market, and the yield on the 10-year Treasury note tumbled to its lowest level in more than a year.

It fell as low as 2.52 percent, down from 2.61 percent late Tuesday and from more than 3.20 percent as recently as November, as traders priced in expectations for a slower economy and tame inflation, as well as this very patient Fed.

The impact should soon filter out to consumers across the economy, and the effects will likely remain for a while.

The yield on the 10-year Treasury, which influences rates for all kinds of consumer loans, could drift higher over the next year, but it’s not likely to cross above 2.75 percent, said Ed Al-Hussainy, senior currency and rates analyst at Columbia Threadneedle Investments.

That would mean rates for the next year would remain lower than they’ve been for much of the past year.

“The Fed no longer has an appetite for tightening rates above” a level that would slow the economy, Al-Hussainy said.

“That signal is quite strong right now and lowers the ceiling for 10-year yields.”