Long Rates Still Staying Below 1%--for a Long Time
Kiplinger’s latest forecast on interest rates
Source: Federal Reserve Open
The Federal Reserve at its recent FOMC meeting recommitted itself to keeping short-term rates near zero “until the economy has weathered recent events,” i.e., for the foreseeable future. The Fed is also continuing to purchase $80 billion of Treasury securities and $40 billion of mortgage-backed securities every month, adding to its balance sheet. The Fed is “all in” to do whatever it takes to support the economy.
The 10-year Treasury yield has risen only slightly off its record low of 0.5%. While it is not likely to move lower, it should stay well below 1% for a long time, given how uncertain the progress of the economy’s recovery will be. Short-term rates will likely stay near zero for even longer — rates on three-year notes are currently almost the same as rates on one-month bills.
Average 30-year mortgage rates are likely to dip slightly below 3% and 15-year rates, a bit below 2.5%, given the low 10-year Treasury rate. They have not fallen as much as would be expected, because of heavy demand for mortgage refinancing. Lenders can get higher-than-normal margins on loans as long as there is heavy demand. Applications to refinance are still more than double last year’s level.
- 1Kiplinger’s Economic OutlooksRegularly updated insights on the economy’s next moves.
- 2GDP: -5.8% growth in 2020, down from 2.3% in 2019Kiplinger’s latest forecast for the GDP growth rate
- 3JOBS: States are reopening, but workers will come back slowlyKiplinger’s latest forecast on jobs
- 4INTEREST RATES: 10-year T-notes staying below 1.0% for a while - currently readingKiplinger’s latest forecast on interest rates
- 5INFLATION: 0.6% through '20, from 2.3% at end '19Kiplinger’s latest forecast on inflation
- 6BUSINESS SPENDING: Down 10% to 20% in '20Kiplinger’s latest forecast on business equipment spending
- 7ENERGY: Crude oil trading from $35 to $40 per barrelKiplinger's latest forecast on the direction of energy prices
- 8HOUSING: Total starts down 6.6% in '20Kiplinger's latest forecast on housing starts and home sales
- 9RETAIL SALES: Ending the year 6% higher than at the startKiplinger’s latest forecast on retail sales and consumer spending.
- 10TRADE DEFICIT: Widening 3% in ’20Kiplinger's latest forecast on the direction of the trade deficit.