The Federal Reserve is meeting again from April 30 to May 1, 2024, and consumers are looking to see if interest rates will be lowered. At its March 2024 gathering the Fed decided to keep the federal funds target rate at 5.25% to 5.5%, where it has remained since July 2023.
To combat ongoing inflation, the rate was raised 11 times between March 2022 and July 2023. Inflation has started to recede, but the Federal Open Market Committee (FOMC) has signaled it wants more positive data before pulling the trigger.
After the last meeting meeting, the Fed predicted three quarter-point cuts by the end of this year. As time goes on, however, that becomes less of a certainty.
Some economists have even suggested rates won't budge until March 2025.
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When will the Fed cut interest rates?
The FOMC meets eight times a year to discuss whether to adjust the federal funds rate, a benchmark that governs overnight lending between commercial banks. Led by Federal Reserve Chair Jerome Powell, the group of 12 considers inflation, employment and the rate of borrowing, among other economic factors.
The FOMC has met twice in 2024, first in January and then again in March. Since then, the Fed has predicted three quarter-percentage cuts throughout 2024, but only if the market allows.
The remaining FOMC meetings this year are:
- April 30 and May 1, 2024
- June 11 and June 12, 2024
- July 30 and July 31, 2024
- Sept. 17 and Sept. 18, 2024
- Nov. 6 and Nov. 7, 2024
- Dec. 17 and Dec. 18, 2024
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What is the federal funds rate?
The Federal Reserve requires banks and other depository institutions to hold 10% of their deposits in reserve. To stay as close to that threshold as possible without dipping below, banks will loan each other money back and forth.
The FOMC sets the interest rate the banks can charge each other, known as the federal funds rate. So they can continue to make a profit, banks then adjust the interest rates they charge consumers.
The fed fund rate has been 5.25% to 5.50% since July 2023. That's the highest since January 2001, when it rocketed to 6.00% in the wake of the dot-com bubble bursting.
When the FOMC raises the target range, it becomes more expensive for consumers to borrow money. Since the slew of hikes in the last two years, for example, the average credit card interest rate soared from 16.34% in March 2022 to nearly 21% in April 2024.
That sounds bad, but it can help slow the economy and lower inflation: When the Fed lowers the benchmark rate, it becomes easier to borrow. That sounds great, but it opens the door for a possible spike in inflation.
What to do while waiting for interest rates to go down
It could be a while before rates drop, but there are still things you can do to get ready.
Open a certificate of deposit
When the Fed lowers rates, annual percentage yields (APY) on savings accounts dip, too. But rates on CDs are locked in when you open the account and stay fixed even if APYs decline.
A high-yield Ally Bank® CD with an 18-month term has a 4.25% APY, with no monthly fees or minimum deposit requirements.
Ally Bank® CDs
Annual Percentage Yield (APY)
From 3.00% to 4.50% APY
Terms
From 3 months to 5 years
Minimum balance
None
Monthly fee
None
Early withdrawal penalty fee
High Yield CDs and Raise Your Rate CDs have early withdrawal penalties that vary based on your CD term. With the No Penalty CD, withdraw all your money any time after the first 6 days following the date you funded the account and keep the interest earned with no penalty.
Terms apply.
Prime your credit score
If you've been waiting for rates to go down to apply for a mortgage or personal loan, now's the time to get your ducks in a row. Your credit score is one of the biggest factors lenders use to determine whether you'll get approved and the rate you'll be offered. A credit score of 620 is considered the baseline for a conventional mortgage, but if you boost your score to at least 750, you could qualify for the most competitive rates.
- Make on-time payments in full. Payment history is the most important element of your credit score. (You'll also avoid late fees and interest charges.)
- Request higher credit limits. A solid record of on-time payments or a bump in income is usually necessary, but if you can raise your credit limit and keep your balance the same, it'll lower your credit utilization ratio, which accounts for 30% of your FICO® Score. (Just don't think of the additional credit as a green light for spending more.)
- Hold off on new lines of credit. The application could require a hard inquiry that dings your credit and, if you're approved, it will lower the average age of your accounts.
eCredable Lift® is a paid service that sends information about positive utility payments to TransUnion, one of the three major credit-reporting agencies. Utility companies aren't typically included on credit reports, so on-time payments wouldn't otherwise help you build credit.
For $9.95 a month, you can link up to eight accounts — including your phone and internet — and report up to 24 months of payment data. For $14.95 a month, eCredable LiftLocker™ adds budgeting tools, identity theft alerts and credit monitoring, among other benefits.
eCredable
Cost
$9.95 per month for eCredable Lift®
$14.95 per month for eCredable LiftLocker™Credit report affected
Transunion®
Credit scoring model used
FICO® Score 8 (or newer) or VantageScore® 3 (or newer)
Results vary. See website for details.
How to sign up for eCredable:
- Link your eligible utility company accounts to eCredable
- Receive an updated VantageScore® and/or FICO® Score
Learn more about eligible payments and how eCredable works.
*Experian Boost™ also adds household payments to your report, but it's free and it works with Experian, rather than TransUnion. According to the company, users whose FICO Scores improve see an average increase of 13 points.
Experian Boost™
Cost
Free
Average credit score increase
13 points, though results vary
Credit report affected
Experian®
Credit scoring model used
FICO® Score
Results will vary. See website for details.
How to sign up for Experian Boost:
- Connect the bank account(s) you use to pay your bills
- Choose and verify the positive payment data you want added to your Experian credit file
- Receive an updated FICO® Score
Learn more about eligible payments and how Experian Boost works.
What to do when rates go down
Here are a few financial options to consider once the Fed does slash interest rates.
Refinance your mortgage
If you bought your home when rates were peaking in 2023, now would be a good time to refinance. After the Fed cuts the fed fund rate, mortgage rates should follow suit.
One of CNBC Select's top picks for mortgage refinancing, Ally Bank offers fixed and adjustable rate terms with no application, origination, processing or underwriting fees. That can save you thousands.
Ally Home
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Fixed-rate, adjustable-rate and jumbo loans available
Fixed-rate Terms
15 – 30 years
Adjustable-rate Terms
5/6 ARM, 7/6 ARM, 10/6 ARM
Credit needed
Not disclosed
Terms apply.
Refinance your student loans
Interest on student loans should also fall after the Fed makes cuts. Borrowers have felt the squeeze since the three-year moratorium on payments ended in October 2023.
SoFi offers terms of up to 20 years for refinancing student loans, with a 0.25% discount on your rate if you sign up for monthly autopay.
SoFi
Eligible borrowers
Undergraduate and graduate students, parents, health professionals
Loan amounts
$5,000 minimum (or up to state); maximum up to cost of attendance
Loan terms
Range from 5 to 15 years; up to 20 years for refinancing loans
Loan types
Variable and fixed
Co-signer required?
No
Offer student loan refinancing?
Yes - click here for details
Terms apply.
Pay off high-interest credit cards
Once rates go down, the annual percentage rate (APR) on your credit cards will likely drop, as well, making it easier to polish off those balances.
So, prioritize making sizeable payments now before rates go up again later.
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FAQ
When will interest rates go down?
The Federal Reserve has indicated that there's a good chance it would cut rates later in 2024.
When is the next Fed meeting?
The Federal Reserve Board will meet next from April 30 to May 1, 2024.
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Bottom Line
The Federal Reserve has six more chances to cut rates in 2024. When it happens, all kinds of borrowing will be easier for the average American. There are several smart money moves you can make before then, too
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*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.
