Watch FOMC Rewind: What the Fed’s December 2020 Decision Means for You
As the public health and economic risks and hardships caused by the COVID-19 pandemic continue, the Federal Reserve is committed to providing full support for the U.S. economy. The December Federal Open Market Committee meeting statement says the Fed will continue to expand purchases of U.S. Treasury and mortgage-backed securities as well as keep interest rates near zero. What does that mean for you? Let’s rewind.
December 2020 FOMC decision
Quick explainer for the December 2020 FOMC decision (video, 1:06 minutes)
Ellen: What’s the latest from the Fed, Lily?
Lily: They just met and decided to keep interest rates low
Ellen: How low?
Lily: They’ve been near 0% since COVID (to help the economy recover)
Ellen: Wait, how do low rates help?
Lily: Low rates make it cost less to borrow, so businesses can get money to hire more people, since more jobs are better for everyone
Ellen: How long will they keep rates low?
Lily: Until there are enough jobs for anyone who wants to work, and until prices start rising a bit faster (like in a healthy economy), and people are confident that’ll continue
Ellen: I read something in the newspaper about the Fed buying lots of bonds. What does that do?
Lily: That helps keep mortgages and other longer-term interest rates low. The Fed said they’ll keep doing that til the economy is back on its feet
Ellen: Great, thanks for the info!
Lily: See ya in 2021!
You may also be interested in:
- FOMC Rewind: Fed Updates Long-run Employment and Inflation Goals
- FOMC Rewind: Interest Rates Explainer
The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.