What's going on?

Almost everyone saw it coming: the US Federal Reserve (�the Fed�) kept its stance on interest rates unchanged on Wednesday. It also signalled that interest rates would be lower for longer than its officials had previously expected.

What does this mean?

As we�ve outlined before, the Fed has said it�s looking for 3 things before it next raises interest rates: 1) a recovering economy, 2) increasing inflation and 3) continued strong employment figures. While the first two have been looking relatively good lately, recent employment data was disappointing. And that was probably the biggest reason that the Fed didn�t raise interest rates. Interestingly, the projections by Fed officials for longer-term interest rates also came down (which is perhaps a sign that they are less confident about future economic conditions).

Why should I care?

The bigger picture: Many are pushing for governments (globally) to start spending to boost their economies. Low interest rates are, arguably, becoming less effective at spurring economic activity (one big investor says central banks globally are losing control and calls it the �Zombie Fed�). The focus is turning to what governments could (and should) do. If they were to, for example, spend money improving infrastructure (like airports and railways), it could boost economic growth both in the short- and, potentially, in the long-term. Expect to hear an increasing clamor from investors for this to happen.

For you personally: �Lower for longer� means mortgage rates (should) stay low, but you might make less on your investments. Low interest rates typically cause mortgage rates to also be low (which supports house prices because more people can afford the mortgages). It also suggests that investments, especially those perceived to be �safe�, like bonds, will earn investors less money over time. That could be a problem if you (or your parents) intend to live off of income from your investments in the future (e.g. in retirement).