The Federal Reserve is scheduled to announce its third interest rate decision for 2024 on Wednesday afternoon, but consumers are unlikely to find relief from high borrowing costs in the short term.
At the beginning of the year, about 9 out of 10 economists said I had predicted The Fed is expected to lower the base interest rate at its May 1st meeting. But shifting economic winds and persistently high inflation complicate policymakers’ plans. As a result, Wall Street now expects the Fed to keep interest rates on hold today, according to a survey of economists conducted by financial data firm FactSet.
The Fed is likely to hold off on cutting rates until late 2024, according to FactSet data, with most experts now planning the first rate cut for the central bank’s September or November meeting. That means consumers will likely continue to contend with rising costs for all types of loans, from credit cards to mortgages, even as the cost of goods and services continues to rise.
Jacob Channell, senior economist at LendingTree, told CBS MoneyWatch: “The Fed has said many times that it’s really hard to control inflation, and they’re willing to keep interest rates high until inflation is more manageable.” “I’m positive about keeping it,” he said. “I can understand why people are concerned and maybe a little upset that the Fed isn’t cutting rates more aggressively.”
However, he added, if the Fed cuts rates prematurely and inflation rises further, economic conditions could worsen for many consumers and businesses.
When is the Fed meeting this week?
The Federal Reserve’s Open Market Committee will announce its interest rate decision at 2:00 pm ET on Wednesday. Federal Reserve Chairman Jerome Powell will hold a press conference at 2:30 p.m. to outline the central bank’s economic outlook and answer questions about the decision.
When will the Fed cut interest rates?
Almost 97% of economists surveyed by FactSet expect the Fed to maintain its current benchmark rate of 5.25% to 5.5%, which is unlikely to happen today. Indeed, even though the Fed introduced policy earlier this year; Three rate cuts in 2024Wall Street investors are currently expecting only a single rate cut.
The core of the problem is stubborn inflation, which has trended higher this year due to rising housing and gasoline costs, despite the Fed’s efforts to keep prices in check. Consumer prices in March 3.5% increase On an annual basis, Increased by 3.2% in February and in january 3.1% increase On a year-on-year basis.
About half of economists expect a rate cut at the Fed’s Sept. 18 meeting, and a majority expect a rate cut at its Nov. 7 meeting. Mr. Channel pointed out that these cuts could be a quarter of a percentage point each, rather than the more favorable reduction of half a percentage point.
“It’s not surprising that investors’ expectations for future rate cuts have fallen significantly,” Stephen J. Rich, CEO of Mutual of America Capital Management, said in an email. Stated. “At this point, we believe there may be two 0.5 percentage point cuts this year.”
Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, also believes the Fed needs to keep interest rates high for a longer period of time. He expects the Fed will likely cut key short-term interest rates twice this year, starting in September, according to a research note.
How will the Fed’s decision affect your money?
Mr Channell said banks should continue to prepare for high borrowing costs.
“Based on the meeting, we will probably have to get used to the average interest rate on a 30-year mortgage being above 7% again,” he said. “This 7% rate that people fear is probably going to continue.”
Credit card interest rates, which are at record highs, also aren’t going to go down, he noted.
“It will remain relatively expensive to borrow money for some time,” Channel added. “We won’t wake up in August and interest rates will go back to zero.”
If there’s a silver lining to this, it’s that savers can now find high-interest savings accounts with yields above 5%, according to Ken Toomin, a banking expert at DepositAccounts.com. It means that it will become. Other savings vehicles, such as certificates of deposit, may also offer attractive interest rates.
