Interest Rates Poised to Fall: Financial Moves to Make Before the Fed Cuts Rates
With the Federal Reserve set to meet on July 30 and 31, 2024, to discuss adjusting the federal funds rate, economists are buzzing about a possible rate cut in the near future. While the odds of a cut in July are slim, the probability of a rate cut after the September meeting has climbed to nearly 100%, according to the CME Group’s FedWatch, a tool that tracks the likelihood of target rate adjustments. This shift in the economic landscape presents a unique opportunity for individuals to strategize and make advantageous financial moves before interest rates decline.
Key Takeaways:
- Interest rates are expected to fall: The Federal Reserve is likely to cut the federal funds rate soon, potentially influencing other interest rates like mortgage rates.
- Time to secure high yields: Maximize your returns by opening a high-yield savings account and locking in attractive rates on certificates of deposit (CDs) before interest rates begin to drop.
Homebuying opportunity: Lower mortgage rates due to a declining federal funds rate could benefit potential homebuyers, making it an opportune time to enter the real estate market.
Open a High-Yield Savings Account
Before interest rates dip lower, secure a high-yield savings account to take advantage of the current higher rates. While banks typically adjust interest rates on savings accounts, locking in a better rate now could mean substantial savings down the line. Explore options like:
LendingClub High-Yield Savings: This account offers competitive interest rates without a minimum balance requirement after $100.00 is deposited.
Western Alliance Bank High-Yield Savings Account: This account boasts a high APY but has a limit on transactions per month.
Find the Best High-Yield Savings Account
To thoroughly compare options and find the best high-yield savings account for your needs, consider utilizing online tools provided by reputable sources such as Bankrate. These tools allow you to filter accounts by features, interest rates, and other important criteria.
Lock In CD Rates
Certificates of deposit (CDs) offer fixed rates for a predetermined period. Locking in a CD rate now ensures you receive that rate throughout the term, regardless of future rate cuts. This means you won’t be impacted if APYs decrease later in 2024. However, remember that CD rates generally mirror the federal funds rate, meaning their return will decline along with the federal funds rate.
Find the Best CD Rates
As with high-yield savings accounts, comparing CD rates from different institutions is crucial. Use online resources from trusted financial websites to analyze rates, terms, and penalties for early withdrawal.
Start Shopping for a New Home
The anticipated decline in interest rates presents a prime opportunity for potential homebuyers. When the federal funds rate falls, mortgage rates generally follow suit, making homes more affordable.
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FAQs
How low will interest rates drop in 2024?
Predicting the exact drop is challenging. However, based on the June Federal Open Market Committee meeting, the median projection for the federal funds rate by the end of 2024 was 5.1%.
What will rate cuts mean for homebuyers in 2024?
As the federal funds rate decreases, mortgage rates typically follow suit. This lowering of borrowing costs could increase affordability for potential homebuyers.
Who benefits from higher interest rates?
Those with fixed-rate investments like bonds, CDs, money market accounts, and other savings vehicles stand to benefit during periods of higher interest rates.
When will interest rates go down?
While a rate cut isn’t expected in July, numerous forecasts anticipate one following the September meeting.
Remember, interest rate fluctuations are complex, and it’s always wise to consult with a financial advisor for personalized guidance on your specific situation. Be proactive and seize these opportunities to make strategic moves before interest rates fall.
