The Federal Reserve announced Wednesday it would keep interest rates at record lows, even though it sees improvement in the economy. This will most likely keep auto loan rates at record lows as well.
The Fed said that it will keep interest rates near 0 percent for an "extended period" to help the economy continue on its recovery path.
The Federal Reserve said in a statement that the job market "is beginning to improve" and economic activity has "continued to strengthen." The Fed explained that "growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit."
Commercial banks’ prime lending rate will stay at about 3.25 percent, the Associated Press reports, which is its lowest point in decades.
This decision by the Federal Reserve to keep the federal funds rate near 0 percent means that it will cost banks, credit unions and car loan lenders less to borrow money to give consumers auto loans. Although it helps consumers save money by borrowing at a low cost for a home or car, it also means savings accounts will earn meager interest.
But low interest rates also convince Americans to buy, which will help the economy in the long run. If consumers know that interest rates will increase in the near future, they might take on a car loan or mortgage now to save money over the length of the loan.