The U.S. Federal Reserve cut its key interest-rate target by a quarter of a percentage point on Wednesday. But Fed Chair Jerome Powell cautioned that another move in 2025 is not guaranteed.
"A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it," Powell said, citing the challenge of making informed decisions amid an economic data blackout due to the government shutdown.
Four experts interviewed by Reuters said they see interest rates continuing to drop in the next six to 12 months.
"When Powell speaks in a press conference, the market habitually reacts negatively for a day or two," said Stephen Kates, a certified financial planner and financial analyst at Bankrate.com, who expects four more rate cuts by the end of 2026.
Wondering what to do with your money now? Here is a playbook for consumers in the current interest-rate environment.
FIXED INCOME
Bond prices fell Thursday, prompted by concerns that a December cut will be shelved.
Doug Boneparth, president of Bone Fide Wealth, a New York-based financial advisory firm and author of the new book, “Money Together,” is not concerned.
“If you invest in bonds believing rates will come down more drastically than they have been, you’re not going to receive the appreciation you want,” Boneparth said.
That is not bad for long-term investors: because bond yields move in the opposite direction of prices, it also means that fixed-income “is still a decent income driver," he added.
CASH AND SAVINGS
The rate on higher-yielding savings accounts in the U.S. is hovering around 4%, which is outpacing the inflation rate by about one percentage point, so you are not losing money by putting your cash in a high-yield account.
“Those rates are going to slowly trickle down, but it might take longer,” Bankrate's Kates noted.
If you already hold a fixed‑rate certificate of deposit, nothing changes. However, if you are planning to put money into a CD, do it soon, before the next rate cut occurs. And if you are looking to park cash in a safe place, Kates shared this advice: “Skate to where the puck is going. This isn’t going to be the last rate cut we see.”
CREDIT CARDS
With the most recent rate cut, credit card users will save roughly $1.92 billion in interest over the next 12 months, according to WalletHub data. It typically takes one to two billing cycles to see a rate cut reflected on your credit card statement.
Rates on new credit card offers are still high – they stand at 24.19%, down from 24.92% at the start of the year, according to Matt Schulz, chief consumer finance analyst at LendingTree.
“They are only going to fall more between now and the end of year, regardless of what the Fed does in December,” Schulz said.
If you are carrying a credit card balance, this is a good time to look at zero-interest balance transfer offers, Schulz said. And you can always call your card issuer and ask them to match other deals you get in the mail or see online.
You can also improve your credit score, which is used by lenders to judge a borrower’s creditworthiness. Overall, credit scores are falling nationally as credit card balances rise along with an increase in missed payments. By boosting your credit score from 600 (fair-ish) to 700 (good), you can lower your overall borrowing costs significantly, Bankrate’s Kates noted.
MORTGAGES AND HOME EQUITY LOANS
Mortgage rates, which are tied to the 10-year U.S. Treasury note, dropped by nearly three-quarters of a percentage point this year, which is good news for borrowers. The average rate on a 30-year fixed mortgage fell to 6.26% during the week ending Oct. 22, well below the 7.19% high reached in mid-January, according to Bankrate.
In the next month, mortgage rates will bounce around sideways, Kates predicts. "In next 12 months, we will be under 6%," he said.
Home-equity lines of credit and adjustable-rate mortgages — which carry variable interest rates — are more sensitive to interest rate cuts. Expect them to adjust within two billing cycles.
