Jerome Powell is the chair of the Federal Reserve. One of his jobs is deciding at what interest rate banks can borrow money from the federal government. The Federal Reserve is basically like the US Government’s bank.

Just moments ago he announced that for the first time since 2020 they will be LOWERING interest rates. Everyone pretty much expected him to lower the rate by either 0.25% or 0.5%, so this is the bigger of the expected drops (which most people also expected) This means a few things:

• It’s generally good for the stock market. Although they’ve been hinting at this rate drop for a while, so not much has changed in the last few minutes with the market because this expectation was already “priced in” to share prices.
• It’s generally bad for your savings account interest. Your days of 5%+ interest in your high-yield savings account are probably numbered, if not gone for the foreseeable future. Since your bank can get a better deal borrowing from the Fed, they don’t need to pay you as much to borrow your money!
• It’s generally good for those who are looking to take out a mortgage or refinance their mortgage. Cheaper rates mean chepeaper mortgages. But if you’re waiting to buy or refinance, today may still not be the day, because the first rate drop is often followed by subsequent rate drops so we’re not sure yet where the bottom of this interest rate drop will land.

ALL THAT ASIDE, it probably doesn’t mean you should be DOING much other than what you have been doing. Grow your career. Spend less. Invest more. Stay the course. No need for tricky financial footwork around the macroeconomic moves of the government. Focus on your race!

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy

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By: Gabriela Gonzalez
Title: What does rates to go lower mean
Sourced From: www.personalfinanceclub.com/what-does-rates-to-go-lower-mean/
Published Date: Tue, 24 Sep 2024 02:13:33 +0000

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