How the Fed’s Rate Cuts Will Affect Your Money—And What to Do About It | Global News Avenue

Fed cuts influential interest rates second meeting in a row Last week boosted the economy and prevented unemployment from rising, but it may take some time for consumers to see the effects.

Two interest rate cuts have put downward pressure on the cost of various types of borrowing, including credit cards and car loans. mortgage loan. However, consumers want to know when they will feel the effects.

Investopedia spoke with Certified Financial Planner Chad Olivier about how interest rate cuts will impact consumers’ finances. The interview has been edited for brevity and clarity.

Investopedia: When and where can consumers start seeing interest rate cuts have a real impact on their finances?

Chad Olivier: Unfortunately, higher interest rates CD, money marketand savings account Probably the first thing you see drop. These types of investments are already getting pretty good interest rates, and I’m going to say the ones that are probably (will be) affected first.

And then if the Fed keeps starting to cut interest rates, like the next two or three times, the market will get used to that. Then we’ll see mortgage rates start to fall next. From that point on, high-interest loan debt will be the last step consumers start to see decline.

Realistically, it’s probably going to take a few more rate cuts from the Fed before consumers really start to see this and the market really starts to believe they’re going to keep cutting rates in what is supposed to be a slowing economy. We will wait and see what the new government’s policies are.

INV: How should investors and savers prepare for future interest rate cuts?

Olivier: Even though interest rates are falling, still try to take advantage of the interest you can earn on your investments. If there is fixed investment CDor any type fixed bond You can target some higher interest now, which might make sense.

If you hold bonds ETF Or anything in the bond market, as interest rates go down, the overall value of those investments goes up. So for our portfolio, we’re starting to add more investments in bonds to take advantage of the strength that we see for the foreseeable future.

We expect interest rates to be lower in the future and as is the nature of the beast – they have gone up a lot and now they are going to start lowering them so that we can keep the economy going. This will help investors, especially more conservative investors, whose bond values ​​and the value of the bond market should appreciate over the next year.

INV: What should consumers be aware of as they prepare financially for next year?

Olivier: I would say if (consumers) are looking to buy a home or some type of large debt project soon, they may want to wait a few quarters to see the true effect of lower interest rates.

The key to watching is inflation. If inflation remains intact and under control, we will have a continuously growing economy. If growth gets too fast, then the Fed may stop cutting interest rates to ensure it can keep inflation under control. So that’s the key to our next step.