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TheStreet Open House

Here's Why the Fed Isn't Hiking Rates Anytime Soon

NEW YORK (BankingMyWay) -- Mortgage interest rates are still below the 4.50% line at 4.40% this week, according to the BankingMyWay Weekly Mortgage Rate Tracker.

That's good news for homebuyers and the home sellers looking to move their properties. Low rates mean a wide open real estate market, with more buyers clamoring for more homes. That reduces inventory and allows homes to sell more quickly and for higher prices as demand rises.

But lower interest rates aren't good for bank savers. Checking account rates are mired near zero at 0.046%, unchanged from last week, according to BankingMyWay, and bank certificates of deposit aren't that much stronger. The average two-year CD is returning a paltry 0.329% this week, up slightly from the last week of March.

That's been much the case for the better part of six years now, as the Federal Reserve keeps lending rates near zero percent so credit pipelines stay open and people and businesses go on borrowing.

In a March 31 speech at the 2014 National Interagency Community Reinvestment Conference in Chicago, newly minted Federal Reserve Chairwoman Janet Yellen indicated strongly the rate picture would stay the same, leaving bank savers wondering what they have to do to catch a break in this economy.

Yellen's speech focused on job creation, a hot-button issue among the electorate. Gallup reports that only 28% of Americans say "it's a good time to look for a job right now," and job creation is regularly at the top of the list of Congressional priorities among Americans.

To spur job growth, Yellen acknowledges the plan is to keep interest rates low, boosting the housing market and helping businesses grow.

Yellen says:

The Federal Reserve has taken extraordinary steps since the onset of the financial crisis to spur economic activity and create jobs, and I will explain why I believe those efforts are still needed.

The Fed provides this help by influencing interest rates. Although we work through financial markets, our goal is to help Main Street, not Wall Street. By keeping interest rates low, we are trying to make homes more affordable and revive the housing market. We are trying to make it cheaper for businesses to build, expand and hire. We are trying to lower the costs of buying a car that can carry a worker to a new job and kids to school, and our policies are also spurring the revival of the auto industry. We are trying to help families afford things they need so that greater spending can drive job creation and even more spending, thereby strengthening the recovery.

While pointing to "steady progress" in the economy, Yellen says the recovery "still feels like a recession to many Americans."

As long as that perception hangs over the economy, bank savers (and homebuyers) can expect interest rates to remain low. In fact, Yellen comes out and says so.

"Our strategies have the same goal -- to encourage consumers to spend and businesses to invest, to promote a recovery in the housing market, and to put more people to work," she said in her Chicago speech. "Together they represent an unprecedentedly large and sustained commitment by the Fed to do what is necessary to help our nation recover from the Great Recession. For the many reasons I have noted today, I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed."

That's another punch to the gut for bank savers, who may start looking at low bank rates as part of the so-called "new normal" and wonder whether they'll ever see stronger bank rates again.

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