Investor Opinion Split on Holding Interest Rates at Current Level Until 2022

In this week’s Sentiment Survey special question, we asked AAII members for their thoughts about the Federal Reserve potentially keeping interest rates at their current level until 2022. Responses were mixed.

Slightly less than one out of five respondents (18%) say that low interest rates will have an impact on savers and those planning for retirement. This compares to 12% of respondents who say that low interest rates will benefit the stock market and prevent an economic downturn. About 10% of respondents say they think that the Fed will increase interest rates as the economy recovers from coronavirus-related shutdowns, while 10% of respondents express their opinion that the Fed will need to increase rates at an earlier date to keep inflation at bay and normalize the economy. Other respondents include those who think the economy should recover on its own (8%) and those who think low interest rates will not prevent an inevitable downturn (7%). Additionally, 7% of respondents say this decision to keep rates at their current level will have a larger impact on the economy in the long run.

Here is a sampling of the responses: 

• “Penalizes savers and those needing to generate income. May cause more risk taking. Could also restrain some consumer spending to offset loss of interest.”
• “Anyone’s guess, but the Fed’s projection for the recovery seems to support low interest rates. I don’t think the economic recovery will gain traction until an effective vaccine for the coronavirus has been distributed.”
• “Due to the pandemic and the state of the world economy, I think it is a good thing—although I’m guessing that it will have an impact on inflation in the upcoming years.”
• “The market should be allowed to make the appropriate correction for poor money management of weak corporations.”

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