The Federal Reserve will likely lower interest rates in 2023 following a string of rate hikes that started in 2022 and continued well into 2023 due to cooling inflation. The Federal Reserve maintained interest rates at its most recent meetings. Furthermore, the Fed has hinted that interest rate decreases are likely in store for the later half of 2024, even though the central bank is not anticipated to do so at its upcoming March meeting.
Lower interest rates could be great for consumers who want to borrow money. Currently, loans are expensive as interest rates remain high. However, if interest rates fall, it may make more financial sense to take out a loan.
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But even though it may take several more months before the Fed cuts rates, that doesn’t mean we have to sit back and watch as consumers. With interest rates still rising, here are some important steps to consider.
1. Get a Long-Term CD
The Fed’s interest rate hike wasn’t all bad news for consumers. Rising interest rates are making CDs even more attractive.
However, if the Fed starts lowering rates, CD rates may follow suit. So now is a good time not only to secure CDs in general, but also to secure long-term CDs.
CD plans that become available in three, four, or five years may pale in comparison to plans available to savers today. So if you’re saving for a distant goal, a 36-month, 48-month, or 60-month CD could be a good choice.
2. Open a high-interest savings account
Just as CD payments are more generous these days, so are savings accounts. So if you haven’t yet made the switch from a brick-and-mortar savings account to a high-interest online savings account, now is a good time to take that step. You can potentially get a much higher interest rate on your money.
Of course, this doesn’t mean you need to completely disconnect from your current bank. Maintaining a checking account with a local bank provides benefits such as access to a wide range of services and personal contact with bank employees. However, online banks often offer the best interest rates on savings accounts, so it may be a good idea to open an account while interest rates are still high.
3. Improve your credit score
If the Fed lowers interest rates, you may want to take advantage of the opportunity to take out a loan. Now is a good time to improve your credit score. This means not only can you qualify for a loan, but you can also secure a competitive interest rate.
There are several ways to improve your credit score. First, pay your bills on time and check your credit report for errors. If possible, you can also pay off existing credit card debt. And that actually matters now that interest rates are still high.
Rate cuts could happen without us even noticing. Before that happens, take these steps to benefit your personal finances.
