Fed Expects Interest Rates to Hold Near Zero Through 2022

Economics
Published

The Federal Reserve held the federal funds rate at the current 0% to 0.25% range and said it intends to keep its benchmark rate near zero through 2022 as the central bank continues to deploy policy tools to underwrite an emerging recovery for the U.S. economy from the COVID-19 pandemic.

Specifically, the Fed noted that it will continue its quantitative easing policy, purchasing on a monthly basis $80 billion in Treasuries and $40 billion in mortgage-backed securities, which is helping to support low mortgage interest rates and housing demand. Home building, and housing in general, will be a leading element of the recovery, as foreshadowed by two months of gains for mortgage applications and better than expected newly-built home sales.

The Fed is projecting a 6.5% decline for GDP for 2020 (NAHB is forecasting a 6.2% drop) due to government-mandated virus mitigation efforts that led to a sharp, sudden stop in economic activity. Like other outlooks, the nation’s central bank is forecasting a strong bounce back in 2021, with growth for that year coming in at a 5% rate.

The fact that the Fed indicated it expects to keep the federal funds rate near zero for the next two years is broadly positive for home building and housing markets. The Fed’s messaging is clear: it will do whatever it takes to return labor markets and the economy to where they were prior to the outbreak of the pandemic. In particular, the Fed is making sure that credit is available for households and businesses to ensure the smooth operation of markets. Housing and home building are important elements for the transmission of monetary policy and will thus feature as front-line sectors during a recovery.

NAHB Chief Economist Robert Dietz provides additional analysis in this Eye on Housing blog post.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Sustainability and Green Building

May 14, 2025

Department of Energy Remodels Annual Student Building Design Showcase

The annual BuildingsNEXT Team Showcase, formerly known as the Solar Decathlon, was held last month in Golden, Colo. This collegiate design competition prepares the next generation of building professionals to design high-performance buildings powered by renewables.

Regulations

May 14, 2025

NAHB Submits Extensive Deregulatory Recommendations to OMB

On May 12, NAHB submitted a comprehensive framework of deregulatory recommendations to the Office of Management and Budget (OMB) that covers several federal agencies that encompass a host of regulations affecting the residential construction industry.

View all

Latest Economic News

Economics

May 14, 2025

Permit Activity Declines in March 2025

Permits continue a downhill trend for the third month in a row. Over the first three months of 2025, the total number of single-family permits issued year-to-date (YTD) nationwide reached 232,221. On a year-over-year (YoY) basis, this is a decline of 3.8% over the March 2024 level of 241311. For multifamily, the total number of permits issued nationwide reached 113,344. This is 3.7% below the March 2024 level of 117,695.

Economics

May 13, 2025

Inflation Eased Again in April

Inflation slowed to a 4-year low in April while shelter inflation remained elevated. Despite the easing, inflation may pick up in the coming months as possible inflationary pressure from enacted tariffs and other policy uncertainties continues to threaten economic growth and complicate the Fed’s path to its 2% target.

Economics

May 13, 2025

Residential Mortgages Experience Weaker Demand in First Quarter

Overall demand for residential mortgages was weaker while lending standards for most types of residential mortgages were essentially unchanged according to the Federal Reserve Board’s April 2025 Senior Loan Officer Opinion Survey (SLOOS).