MADISON HEIGHTS (WWJ) – The Federal Reserve says it will likely keep interest rates at record lows for the next two years after acknowledging that the economy is weaker than it had thought, with increasing risks.
It’s the first time the Fed has pegged its “exceptionally low” rates to a specific date. The Fed had previously said only that it would keep it key rate at record lows for “an extended period.”
WWJ Business Editor Murray Feldman says lower interest rates may not spur people to go out and spend money right now.
“There’s the fear that’s gripping everyone and the reason that the interest rates will remain low is to stimulate the economy , to get people to go out and buy, but you have to have consumer confidence for that,” said Feldman, speaking live on WWJ Tuesday afternoon.
“What builds consumer confidence? Higher housing prices, a better jobs picture. These are still problems that the economy & the nation is dealing with right now.”
The Fed says it expects to keep its key interest rate near zero through mid-2013. It’s been at that record low since December of 2008.
So, what does this mean for the majority of us? Should you be making changed in your 401k? WWJ’s Pat Sweeting posed the question to Kami Zaracki at Better Investing in Madison Heights.
She says stay the course.
“The think about 401k’s is that you are investing for the longterm. We know that just as markets go through downturns, they also have some pretty spectacular recoveries,” said Zaracki.
“And if you start changing your investing strategy and your 401k, you run the risk of missing the upturn,” she said.
In the meantime, Zaracki says now is “absolutely” the time to buy. She said two stocks that Better Investment members have been buying lately are Apple and Ford.
The Dow soared in late trading, Tuesday, closing up more than 400 points. (More on this from CBS News).