"Just how long will interest rates be low?” The past year’s record-low interest rates had lenders and borrowers alike asking that very question.
Historically low interest rates were due partly to unprecedented steps by the Federal Reserve to stimulate economic growth.
“It’s probably safe to say that one of the single most powerful influences on the markets, not just here in the United States but worldwide, has been actions taken by the world central banks to kick-start economies in recession or teetering on recession by, one, creating massive amounts of liquidity, and by two, encouraging investors to take more risks by pushing interest rates down to levels never before seen, at least in recent history,” says John De Clue, Chief Investment Officer for The Private Client Reserve.
While the Fed might decide to reduce or discontinue its quantitative easing policies if the economy shows signs of faster growth, we believe it’s unlikely to want to potentially impede stronger economic growth by withdrawing monetary stimulus too quickly.
A low interest rate environment might create potential borrowing opportunities, but “how to react to interest rates is very much client- and transaction-specific,” says David Mook, Chief Private Banking Officer for The Private Client Reserve. “It depends largely on how you’re using your money and what you aim to achieve.”
Consider four ways to potentially take advantage when rates are low.