The Fed Could Be Done Cutting Its Interest Rate For a While—What Should You Do? | Global News Avenue

The Federal Reserve lowered its benchmark interest rate on Wednesday, but it may be the last rate cut for a while.

After policy committee meeting, Fed announces cuts to its influence federal funds rate quarter point to make it reduced by a full percentage point than at the beginning of the year. In addition to rate cuts, central bank governors have also released forecasts for future policy paths, and on average, they expect rate cuts in 2025 to be much smaller than previously expected.

The federal funds rate affects interest on a variety of borrowing costs, including car loans, credit card interest and mortgage rates. That means Wednesday’s developments could impact your budget heading into the new year. Here’s what financial advisors recommend you do after the Fed cuts interest rates.

Know what your bank is doing

The federal funds rate is a target range for borrowing costs charged by commercial banks when they lend each other excess reserves. overnight.

Banks are likely to pay less to borrow from each other after Wednesday’s rate cut. In turn, banks may pass these changes on to customers, lowering loan and savings rates. However, they are under no obligation to directly track rates or inform customers of rate changes.

Robert Persichitte, a certified financial planner at Delagify Financial, recommends being diligent and responsible as a consumer. Banks can change interest rates at will, and monitoring lending and savings rates during this period is key.

“Just because interest rates go up or down, it doesn’t mean your account is going to move in either direction,” he said.

“Don’t think you 100% know the future”

While Fed officials on average say they expect only two quarter-percentage point rate cuts in 2025, the economic forecast is only a snapshot and could change as the economy changes.

“We can’t guarantee that interest rates are going to continue to go down, and they may go up,” Pesicht said. “So don’t think you know 100 percent about the future.”

Economists generally expect the Fed to leave interest rates unchanged at the policy committee’s January meeting, meaning rates will remain unchanged until another meeting in mid-March. However, predictions beyond that can be murky.

“If your local sports team is going to win or lose this weekend, you can place a bet on it and have some idea of ​​it,” Pesicht said. “‘Will they win the championship this season?’ is a little less clear. And then, ‘Will they win the championship 10 years from now?’ “Very unclear.”

Diversify where you have money

Certified financial planner David Demming Sr. says that since you can never be sure what will happen next, it’s best to diversify during times of change.

invest your money mutual funds or ETFIt can give you a portfolio of different stocks or bonds, spreading risk across multiple investments, he said. For savers, Persichitte recommends lockdown Long term CD or create one bond ladder Improve your returns.

“Show discipline and patience, because when people panic, they shoot themselves in the foot,” Deming said.