Inflation has cooled over the past year, so the Federal Reserve keeps hinting about interest rate cuts.
But will the Fed take action at its late July meeting and announce its first interest rate cut of the year? That’s questionable.
One financial expert is worried that higher interest rates may be here to stay for a while. And while that’s great news for some people, it’s terrible news for others.
Are we stuck in a holding pattern?
In mid-July, JPMorgan CEO Jamie Dimon issued one of his famous economic warnings. And it’s a good news/bad news situation.
Dimon said, “There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world…therefore, inflation and interest rates may stay higher than the market expects.”
Of course, Dimon’s economic projections aren’t always correct. But when he heeds a warning like this, you may want to pay attention.
What higher interest rates mean for consumers
Higher interest rates can be harmful to consumers because they make it more expensive to borrow money. These days, it costs extra to sign an auto loan or carry a credit card balance, and it’s all because of higher interest rates. So consumers with debt — or those who need to take on debt — are eager to see interest rates come down.
On the other hand, elevated interest rates are a great thing for people with money in the bank. Not only are savings accounts paying generously these days, but CD rates are sitting at their highest levels in years. Those with cash to spare can really benefit by earning a generous risk-free return on their money.
What does Dimon’s warning mean for you?
Because we don’t know what the Fed will decide to do at its next meeting — or future 2024 meetings, for that matter — it’s important to take Dimon’s words with a grain of salt. However, if you’re looking to put a loan in place but haven’t done so yet, it makes sense to wait, if you can, until at least July 31, to see if the Fed announces its first interest rate cut. If so, you may find that it’s a bit cheaper to borrow in August.
On the other hand, if you have money you don’t need for emergency expenses or something else, you may want to open a CD before July 31 in case the Fed decides to move forward with an interest rate cut. CD rates shouldn’t plunge following a Fed rate cut — but they may start to dip a bit once a cut is announced. You might as well eke out as high a CD rate as you can if you have the money now.
All told, we won’t know what the Fed does about interest rates until the central bank meets and shares its decision. But it’s a good idea to pay attention to interest rate cuts — or a lack thereof. They could play more of a role in your financial decisions than expected.
Alert: our top-rated cash back card now has 0% intro APR until 2025
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.