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Hi Taylor
- This happens a few times a year—I read about the Fed doing
something with rates and it sounds important. I never really understand
what it means or how it will affect me. Care to explain?
Hi Josie - You're not alone! There's always a lot of fanfare when
the Fed makes any sort of announcement, but then what? What does it
mean for your paycheck and your daily expenses? Aside from a quick
bump in the stock market, there's nothing you'll feel immediately
on account of the Fed predicting rate cuts, but there are things to
be thinking about for the coming year. |
1. Interest
rates coming down. If the plan holds to drop rates throughout
2024, people will finally see some relief on the interest they're
paying. Home sales just had their worst year in almost three decades,
largely because prices kept going up while interest rates and
inflation soared. Lower borrowing rates will provide a lot of
relief for prospective homebuyers, and it will also help with
car payments and any other type of loan. It's important to remember
how interconnected all the various types of spending are; when
corporations start saving money on bank loans, those savings often
ripple out to consumers.
2. Economy heating up. It would be great if interest rates
could always be low, but that wouldn't be sustainable in the long
run. Economic growth has to be tempered occasionally to curb inflation,
and that's what the Fed has been doing over the last year and
a half. Now, after signaling that rates will reverse course, that's
an indication that we can expect to see growth ramping back up
in the short term. Depending on your line of work, you may or
may not see or feel these benefits directly. From an investment
standpoint, economic growth can lead to surging markets and more
blossoming retirement accounts.
3. Inflation on the mend. Our current Fed, Jerome Powell,
has been very clear that his primary concern over the last two
years was dealing with inflation. Even as people grew concerned
about rate hikes hurting the economy, he stayed the course in
hopes of avoiding the type of inflation that could cause a more
long-term depression. So, if he's willing to signal an end to
these rate hikes, that means he's feeling confident we've made
it to the other side of a years-long battle with inflation. That
doesn't mean prices will drop across the board, but competitive
pricing should start moving things in the right direction.
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| We're always
riding different economic waves, so the upcoming rate cuts are just
one moment in that ongoing ebb and flow. It's a positive moment, so
keep on working and earning and investing and enjoy the fruits of
your labors. Thanks for the question, Josie! |
| Legal Disclaimer:
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.
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