What Not to Do When Fed Lowers Interest Rates

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On July 31st, Federal Reserve Chair Jerome Powell announced that interest rates would remain unchanged, for now. This decision has left America frustrated as the Fed had been hinting they would be lowering interest rates sometime this year, and now we’re more than 7 months in. However, there is still a chance that the Fed will lower rates in September, so here are some tips on what not to do if that is the case.

If you are seeking a loan, immediately borrowing money may be your most likely move when the first rate decrease occurs, but in actuality, the first rate decrease will not be significant. Even if the Fed decides to lower rates multiple times at the end of year, we’re at a record high, so it will take a long time to lower to a reasonable level. In the end, seeking a loan if the September decrease happens will likely not really be worth it.

For those thinking about buying a home, refinancing in the near future is inevitable if you decide to take on a mortgage at the first rate decrease. Be sure to take a look at your numbers because you do not want to end up paying “thousands of dollars to buy down your mortgage rate now, and then thousands more in fees to refinance”.

Also, if there are lowered interest rates in September, credit card debt rates will not immediately improve either. Currently, the average rate is “20.7%” and even if the rate decreases to the mid-teens, it is still quite “pricey”.

With the recent announcement, there are growing concerns that the Fed will not be making an interest cut this year at all. However, the Fed still has meetings in September, November, and December, so a rate cut is not entirely off the books. Still though, you should keep up with the news so you can gauge if your business plan needs adjusting based on your ability to borrow money. The best way to do this is to follow XQ CPA’s blog. We provide you with the latest tax and small business news all week.

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Sources:

https://www.cnn.com/2024/07/31/business/moves-to-make-interest-rates/index.html