What's next for US interest rates?
Rate cuts pushed off as inflation sticks around
![A pensive Jerome Powell sits under a row of intense lights](https://cdn.statically.io/img/cdn.mos.cms.futurecdn.net/Ty5YW2VW32zgwD7VKb4hWP-415-80.jpg)
The Federal Reserve left interest rates unchanged once again at its June meeting, marking the seventh consecutive time it has done so. For now, that leaves the central bank's benchmark interest rate between 5.25% and 5.50%, where it has remained since July 2023, and which marks its highest level in 23 years.
At its June meeting, the Fed also revised its earlier plans to make multiple rate cuts throughout the year. Now, it plans to make just one cut before the end of the year.
What will the Fed do next?
Fed officials have "predicted just one cut in 2024, down from a forecast for three previously," said The New York Times, though Federal Reserve Chair Jerome Powell suggested that the forecast is not a firm plan. Rather, Powell indicated the decision "hinges on inflation slowing, but that rate cuts could also come if the job market falls apart unexpectedly."
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
![https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg](https://cdn.statically.io/img/cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516-320-80.jpg)
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
In 2025, however, rate cuts could start coming. The Fed's Summary of Economic Projections, released at its June meeting, "shows four cuts penciled in for next year, with the benchmark rate expected to dip to about 4.1% by the end of 2025," said CBS News.
"Rate cuts that might have taken place this year, take place next year," Powell said. "There are fewer rate cuts in the median this year, but one more next year. By year-end 2025 and 2026, you are almost exactly where you would have been — it's just later."
When is the next interest rate decision?
The next Federal Reserve meeting is scheduled for July 30-31. It's unlikely any changes to rates will come that soon though — "July is probably too soon for the Fed to see enough progress on inflation," said The Washington Post. Its following meeting in September still "could be cutting it close, analysts say," while "the November meeting will be during the week of the presidential election," which leaves its December meeting for a possible cut.
How do interest rates affect the economy?
The Fed uses interest rates "like a gas pedal and a brake pedal," Forbes said. Lowering rates stimulates the economy; raising rates slows the economy down. The agency doesn't actually set the funds rate — banks do that — but "the Fed assumes that banks will use it as a floor in their own lending," Forbes added.
Rate changes usually take "at least 12 months" to have "widespread economic impact," Investopedia said. But the stock market reacts immediately. For example, when Fed chairman Jerome Powell signaled last year that further interest rate hikes were likely, the market went into a bit of a tailspin. The major indexes each fell more than 1%. Beyond stocks selling off, "Treasury yields rose and the dollar extended again after Powell's comments," said Reuters.
What do rate hikes mean for your wallet?
As Kiplinger said, "rate hikes are a blessing and a curse for consumers." When the Fed raises rates, consumers will pay higher interest rates on debt like credit cards, home equity lines of credit, and private student loans. However, on the flip side, savings rates also tend to increase. In the face of rate hikes, Kiplinger offers the following pieces of advice:
- Pay off any debt. Aim to pay off your debt before interest rates get any higher. While the impact might feel gradual initially, continued increases ultimately can make paying off debt more challenging.
- Lock in rates if you can. For those with a home equity line of credit, consider locking in a lower rate on all of a portion of your balance.
- Take advantage of top savings rates. Finally, take advantage of increasing savings rates. Kiplinger advises consumers that they'll usually find the best rates at online banks or other online financial institutions, including the ones in the table below.
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.
-
'Biden bows out'
Today's Newspapers A roundup of the headlines from the US front pages
By The Week Staff Published
-
The best patisseries in Paris
The Week Recommends Indulge in intricately designed sweet treats from the city's top pastry chefs
By Irenie Forshaw, The Week UK Published
-
Canada is facing an uphill battle against car theft
Under the Radar More than 200 stolen vehicles from Canada are detected every week
By Justin Klawans, The Week US Published
-
When is pet insurance worth it?
The Explainer Decide if it makes more sense to brace for big vet bills or pay a regular premium
By Becca Stanek, The Week US Published
-
Should you fly or drive on your next trip? Here's how to decide.
The Explainer Make the best choice for your wallet
By Becca Stanek, The Week US Published
-
The midyear financial check-in: why it matters and what to review
The Explainer This year is halfway over. Have you checked your finances?
By Becca Stanek, The Week US Published
-
What to do if you're worried about running out of money in retirement
The Explainer Inflation is putting more retirees at risk
By Becca Stanek, The Week US Published
-
4 different budgeting methods — and how to choose one that works
The Explainer Pick something you'll actually stick to
By Becca Stanek, The Week US Published
-
4 tips to have fun this summer without breaking the bank
The Explainer Prices are climbing, so keep your wits about you
By Becca Stanek, The Week US Published
-
How much do you really need to set aside for retirement?
The Explainer Be smart about saving for your golden years
By Becca Stanek, The Week US Published
-
4 ways to cover college without taking on debt
The Explainer Federal loans are not your only option when it comes to paying for school
By Becca Stanek, The Week US Published