Interest rates<\/p>\n
Investing<\/p>\n
Federal agencies<\/p>\n
Personal finance<\/p>\n
<\/a><\/p>\n Facebook<\/p>\n Tweet<\/p>\n <\/p>\n Email Link<\/p>\n \n Federal Reserve Chair Jerome Powell hinted interest rate cuts could be coming soon in a speech on Friday<\/a>, a move that could affect everyone from global markets to individual Americans.\n <\/p>\n \n Powell underscored that any upcoming rate cut would be dependent on the economic data. But Fed watchers took his comments to mean the central bank\u2019s monetary policy committee may decide to lower them at its next meeting, in mid-September.\n <\/p>\n \n \u201cWhile a September rate cut is highly probable, it is not a done deal,\u201d cautioned Greg McBride, chief financial analyst at Bankrate.\n <\/p>\n \n Investors nonetheless welcomed the prospect of a rate cut, sending the Dow soaring 800 points<\/a> on Friday to close at a record high.\n <\/p>\n \n Whenever the Fed does cut interest rates, here\u2019s how it could affect your financial life.\n <\/p>\n Bank savings and CDs<\/p>\n \n When the Fed cuts its key overnight lending rate, lower rates on bank savings and loans tend to follow. But they may even start slipping a little in advance of any decision on your savings.\n <\/p>\n \n \u201cSavings rates and CD rates will start to slide, and that will pick up speed as we get closer to the actual resumption of rate cuts,\u201d McBride said.\n <\/p>\n \n Whatever happens with rates, one thing likely won\u2019t change: You\u2019re still likely to get the highest interest rates on your savings if you put your money in a high-yield savings account from an FDIC-insured online bank, which has to compete for deposits more fiercely than behemoths like Chase or Bank of America.\n <\/p>\n \n If you already have money in a CD at a good rate, that rate won\u2019t change, and you\u2019ll get the interest you signed up for. If you locked in a really high rate already and the CD is \u201ccallable,\u201d it\u2019s possible the bank may decide to recall it. If so, it will return your principal to you and whatever interest you\u2019re owed to date.\n <\/p>\n \n Any loan you\u2019ve already taken out with a fixed rate won\u2019t change. Any new loan you\u2019re seeking will likely have a lower rate than you would have seen if the Fed hadn\u2019t cut.\n <\/p>\n \n However, unlike the anticipatory rate declines on the interest a bank has to pay you on savings, you\u2019re not likely to see banks drop the interest rates you have to pay them before they have to.\n <\/p>\n \n When it is to the advantage of the lender, rates may be slower to move lower than consumers would like,\u201d said Bobbi Rebell, a certified financial planner at CardRates.com<\/a>.\n <\/p>\n \n Take new personal loans. \u201cThey tend to lag Fed rate cut changes to the downside,\u201d Rebell noted. But, she added, as in any rate environment, \u201cthe stronger your credit, the more you are likely to see a better loan rate, because you are a more desirable consumer for the lender.\u201d\n <\/p>\n \n Your credit card issuer will lower your variable rate, mimicking whatever rate cut the Fed makes, though there could be up to a three-month lag, McBride said.\n <\/p>\n \n But don\u2019t expect to save a ton of money if and when it happens.\n <\/p>\n \n Why? Credit card rates are crazy high \u2013 the average is still 20.13%, per Bankrate. So a quarter to a half a percentage point cut won\u2019t do too much for you if you carry a balance from month to month.\n <\/p>\n \n \u201cThe Fed has to cut rates a lot before it has a measurable impact on households. Remember, the Fed cut rates a full percentage point last year \u2014 and the average credit card rate is still over 20%,\u201d McBride said.\n <\/p>\n
\n See all topics<\/p>\n
\n <\/a><\/p>\n