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Friday, April 19, 2024

What will happen in the next Fed meeting? What to know – and how to prepare

Following signs that inflation was cooling earlier this year it actually increased in July, again in August and remained unchanged in September. While the October inflation report isn’t quite ready, the Federal Reserve is moving ahead with its previously scheduled meeting, set to take place next week on October 31 – November 1.

While many experts are predicting an eventual increase to the benchmark interest rate – already at a 22-year high at a range of 5.25% to 5.50% – all eyes will be on the Fed next week to see if the change comes then, in their final meeting of 2023 or at a date in 2024. And while higher rates will again lead to higher borrowing costs, they will also cause the returns on interest-earning vehicles to rise, too.

See how much you could be earning with a top CD account here now.

What will happen in the next Fed meeting?

An additional interest rate hike is all but inevitable, particularly with inflation stuck at 3.7%, above the Fed’s target goal of 2%. The question then mostly revolves around timing. Will Fed chairman Jerome Powell announce a rate hike on Wednesday? Or will they wait a bit longer?

“We are attentive to signs that the economy may not be cooling as expected,” Powell said at the Jackson Hole symposium in the summer. “We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

That said, many don’t expect the Fed to move rates up, at least not now. That’s even after GDP rose 4.9% in the third quarter of 2023, despite the series of rate hikes. With rates likely to remain where they are then, both borrowers and savers should strongly considering make some smart money moves now, while they still can.

Start by exploring your high-yield savings account options here and start earning more money.

How to prepare for the next Fed meeting

While no one knows for sure what will happen in the next Fed meeting, there are some strategic moves to make now. This includes:

Opening a CD

While under 1% just a few years ago, it’s not uncommon to find a CD account with an interest rate of 5.5% or higher right now. Some savers may even be eligible for an account with a 7% rate. These accounts are particularly attractive currently because the interest rate they come with is locked. So if the interest rate environment stabilizes – or even falls a bit in 2024 – account holders will still enjoy earning interest at the same APY they opened an account with. On the other hand, if you think rates will definitively rise yet again soon, you may want to open a short-term CD now so that your account will expire in time to open a different account at that presumed higher rate.

Get started with a CD here.

Opening a high-yield savings account

A high-yield savings account operates just like a regular savings account, albeit at the higher interest rate. In fact, you can easily find an account with a rate 12 times higher than the national average. That said, interest rates on these accounts are variable and subject to change over time. So it makes sense to open one as soon as possible. By doing so, not only will you immediately start earning interest at the elevated rate but you’ll also be positioning your money to earn an even higher rate if and when the Fed bumps up the benchmark rate again.

Get started with a high-yield savings account here now.

Locking in a mortgage rate

Sure, mortgage rates are high now. In fact, they’re the highest they’ve been in decades. So the appeal of locking in a mortgage rate for homebuyers today may not be strong. But take a step back and look at the greater rate environment. If rates do indeed go up again soon the rates for home loans will go up with it, possibly close to 9% or more. In the face of this very realistic possibility, then, it can make sense to lock in today’s rate now. While a 7.75% or 8% rate isn’t anyone’s idea of a bargain, it could be much cheaper than what’s available if you wait and hope the market changes. Plus, you could always refinance in the future.

See what mortgage rate you’d qualify for here now.

The bottom line

Today’s rate environment can be painful for millions of Americans. But there are still steps you can take now, regardless if rates rise again soon. This can include opening high-interest earning CDs and high-yield savings accounts (high-yield checking accounts could be worth it, too). And it may mean locking in today’s high mortgage rates, if only so borrowers don’t have to pay even more in the weeks and months to come. By making these moves now you’ll immediately better position your financesand for the long term, too.

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