Federal Reserve officials announced that they are keeping the central bank's benchmark interest rate unchanged, a decision that was widely anticipated by economists given recent inflation data indicating that prices continue to rise at a faster rate than desired by the Fed.
Members of the Federal Reserve stated on Wednesday that although inflation is moderating, they "do not anticipate it will be appropriate" to lower rates until they are confident that inflation is moving towards their 2% target.
The Fed confirmed that it will maintain the federal funds rate within a range of 5.25% to 5.5%.
Many consumers, weary of inflation, are hoping for relief from high borrowing costs, a consequence of the 11 interest rate hikes implemented by the Fed since early 2022. Despite inflation cooling down, it remains slightly above 3% annually, exceeding the Fed's 2% objective.
As a result, the Fed has decided to hold off on any rate cuts, with Chair Jerome Powell emphasizing previously that the central bank is cautious about reducing rates prematurely and triggering another bout of inflation.
Anticipating Fed Interest Rate Changes in 2024
Economists are predicting that Americans may have to wait until the Federal Reserve's June meeting, or possibly even later, for the first rate cut since March 2020. This initial rate cut occurred when the pandemic forced an economic shutdown, leading the central bank to reduce rates in an effort to stimulate spending.
According to LendingTree economist Jacob Channel, it is unlikely that rate cuts will occur until the second half of 2024. In an email, Channel mentioned, "Indeed, we may not see rates fall until the fall."
Impact on Personal Finances
With the Federal Reserve maintaining current interest rates, borrowing expenses are expected to remain high. This will affect various financial aspects such as credit card rates and loans for big-ticket items like cars or real estate.
Currently, the average APR on new credit cards stands at 24.66%. LendingTree credit analyst Matt Schulz highlighted that March marked the 24th month out of the last 25 where APRs have risen. Schulz also mentioned that some credit card companies might raise their APRs following the recent announcement.
"Unless there is unexpectedly poor economic news, I anticipate that any increases will be relatively small. Nevertheless, after two years of consistent upward movement, even minor increases are unwelcome," Schulz commented.
Despite the challenging scenario, there is a silver lining for consumers in the form of high-interest savings accounts and Certificates of Deposit (CDs). Some CDs are currently offering rates as high as 5%, as highlighted by banking expert Ken Tumin from DepositAccounts.com.
Despite this, certain banks are reducing their rates in preparation for a potential Fed cut later in the year, along with the belief that the central bank will not implement any more hikes in 2024.
