On Wednesday, the Federal Reserve may raise the federal funds rate for the 10th consecutive time to help reduce inflation. Whereas the Fed raised interest rates was done indirectly More expensive to borrowIt has made saving more useful, for some Certificates of deposit And High yield savings rates Above 5.00% APY. But we may have reached a tipping point.
At the FOMC meeting, some experts think the Fed may raise interest rates again. However, as inflation cools and The unemployment rate is stableOther experts believe that there is still a chance that the Fed will pause interest rate hikes, which could cause savings and deposit rates to stagnate or even decline slightly.
Here’s what five experts predict and what it means for your portfolio.
Read more: The Fed rate hike decision will be made on Wednesday. Here’s what that means for your savings
Will there be another Fed rate hike?
Experts are divided on whether the Fed will raise interest rates again or pause their hikes. But some experts think the Fed may raise interest rates once last May.
Last Consumer price index report It shows that inflation rose just 0.1% from February to March – a smaller increase than in previous months. But inflation remains high, at 5% year-on-year. Since we are not at the Fed’s 2% target range, there is a possibility that we could see another rate hike, but not as significant as last year’s 50-75bp increase.
said Lawrence Sprung, certified financial planner and author Financial planning got personal. “This is likely to cause banks to adjust interest rates higher than we are today.” While Sprung expects rates to rise a bit more, he doesn’t expect them to go above the high levels we’ve seen for several weeks.
said Chelsea Ransom Cooper, Managing Partner and Director of Financial Planning Zenith Wealth Partners. It does not go down as easily as it goes up.
“Inflation goes up like a rocket, but it comes down like a parachute,” Cooper said.
The Federal Reserve has raised the federal funds rate several times since 2022 to combat inflation, indicating how long it could take to balance the economy and inflation. She believes it will take some time to reach the target rate of 2%. “The next meeting of the Federal Open Market Committee in May could be the last rate hike this year,” she said.
What can be expected if the Federal Reserve does not raise interest rates?
While some experts believe the work of taming inflation is far from over, Powell V The Federal Open Market Committee meeting in March The US economy has slowed significantly.
“We no longer state that we expect continued interest rate increases to be appropriate to suppress inflation; instead, we now expect that some additional policy may be appropriate,” Powell said. Based on Powell’s comments, last month’s CPI report, and signs of slowing inflation, some experts believe that the recent series of rate hikes is over for the foreseeable future.
said Kari Carbonaro, a certified financial planner and director of the Women’s Wealth Division at The Financial Times Capital management advisors. “We’ll have to wait for the dust to clear from all the rapid and violent spikes we’ve already seen.”
There is a possibility that the Fed will do nothing, said Ligia Vado, chief economist at the Ministry of Finance National Association of Credit Union. There are several reasons it can occur.
First, banks are feeling pressure from the tightening of underwriting standards that they have sparked Recent bank failures and other factors. Moreover, there is already a decline in access to credit and borrowing. “It could be argued that the influence of Silicon Valley makes Fed action unnecessary,” Fado said.
If the Fed doesn’t raise rates, you can expect one of two things to happen: Rates will remain flat, which can be good if you want more time to pick the right savings account option or continue to earn a decent return from the high-yielding savings account you already have. . On the other hand, rates may decrease slowly, and any variable rate account may see a decrease in APY, which means you will earn less on your savings. In this case, fixed-price options, such as CDs, may be worth considering, so secure a high price now.
What does the Fed’s next move mean for your money?
said Tim Doman, certified financial planner and CEO Top mobile banks.
Whichever way the Fed goes, banks will respond to the Fed’s move by adjusting their rates accordingly, whether it pushes interest rates higher or keeps them stable for a while. Watch what the Fed says and be prepared to adapt your savings strategy if necessary, Doman said. Flexibility is key in the current economic environment.
For now, think about how you plan to allocate your savings to determine the best savings account option. It’s generally a good idea to focus on it Build an emergency fund First, then put extra savings away in accounts that might pay better interest rates, like CDs. An all-liquid savings option, such as A High yield savings or Cash sign accountAllows you to access your funds in the event of a trial unexpected expenseOr you face layoffs or find a price hike that lowers your paycheck even further.
Once the contingencies are covered, A.J CD It is another option worth exploring. Most CD terms offer more than 4.00% APYs right now, even for shorter periods. Just make sure you don’t need the money before the term expires – or you’ll face early withdrawal fees. And if you want more flexibility but also like the idea of a fixed interest rate, you can Building a CD ladder Instead, invest in CDs that come at different times to make it easier to access your money.
If you are carrying high-interest debt, eg credit card balancesYou’ll want to focus on paying off these accounts. As the Fed raises interest rates, saving rates go up, and so does the cost of borrowing — making your credit card balance more expensive. If you can calculate a payment plan, focus on putting as much high-interest debt as possible each month, while still setting aside some money for savings. If you’re paying too much interest to affect your debt, consider a Balance transfer credit card or a debt consolidation loan. a Balance transfer card It can offer 12 to 18 months to process your debt, without interest, while a debt consolidation loan usually has lower credit requirements, a lower interest rate than credit cards and can help stretch your payments over several years.
Whether your goal is to save more or get rid of credit card debt, now is the time to act. Experts agree that the tipping point for interest rates is coming soon, so you’ll need to take advantage of higher rates to maximize your savings. And with interest rates expected to remain high for the foreseeable future, it’s also imperative to pay off high-interest credit card debt sooner rather than later.
ليست هناك تعليقات:
إرسال تعليق