What The Paused Interest Rate Hikes Really Mean to You

(DailyDig.com) – The Federal Reserve has said that it will not be raising interest rates at the meeting it held on November 1.

The Fed, in 2022, raised interest rates after seeing inflation soar over its 2% target. It has increased its key interest rate eleven times since March 2022. Put simply, consumers should welcome the delay in further interest rate increases.

Interest rates for consumers are not determined by the Fed. A loan’s interest rate, for instance, is determined not by the Federal Reserve but by the specific lending institution itself.

The federal reserve fund rate is the interest rate at which banks lend to one another for short periods of time, and it is regulated by the Federal Reserve. When this rate rises, financial institutions often pass along their costs by charging customers more in interest fees across the board.

After eleven rate increases, the cost of borrowing money is high for consumers. Even though the Fed didn’t lower rates at its most recent meeting, consumers shouldn’t count on any quick fixes.

For borrowers carrying balances on variable-rate credit lines, however, the reality that interest rates did not rise is welcome news. Borrowers might respond to rising interest rates by delaying the signing of new loans. However, individuals with outstanding balances on variable interest credit lines before the rate increases by the Fed’s have mostly accepted the new terms and paid their increased balance due.

What this implies is that, if you don’t have to borrow money at the moment, wait a while. Depending on how the inflation situation develops, interest rate reductions might begin as early as the latter half of 2024. If and when that occurs, the cost of borrowing may drop.

Meanwhile, if you have debt on a line of credit with variable interest, you should do everything you can to pay it down before rates possibly rise. The Federal Reserve’s rate rises have prompted banks to offer higher interest rates on certificates of deposit (CD) and savings accounts; therefore, if you’re able to do so, you should invest in them.