WHAT THE RECENT FED RATECUT MEANS FOR YOU And What You Should Do About It
WHAT THE RECENT FED RATE CUT MEANS FOR YOU
And What You Should Do About It
This past September, the Federal Reserve announced a 0.5% reduction in short-term interest rates, delivering a bigger-than-expected cut. This move marks a shift in strategy from the previous two years.
“The Federal Reserve spent the last couple of years working to get inflation under control,” explained Vance Wealth Founder and CEO John Vance. “The economy was overheating after so much stimulus money came out of the pandemic, combined with historically low interest rates.”
For many, the rate cut is welcome news, but its impact will vary depending on your financial situation. Here are five key areas to consider when deciding what the rate cuts mean for you.
1. Borrowing Got Cheaper
Expect lower interest rates on loans, such as credit cards, auto financing, and home equity lines of credit. Whether you’re planning a big purchase or considering debt consolidation, this change could reduce your borrowing costs.
2. Savings Could Pay Less
While borrowing costs drop, so do returns on cash savings. “When the Fed raised its benchmark rate, banks responded by increasing interest rates on savings accounts and certificates of deposit,” noted Vance Wealth Vice President Jerrod Ferguson. “But as rates fall, those returns will decrease.”
Jerrod suggests savers re-evaluate their financial strategies: “People who were earning 5% on money market funds without much risk need to ask if it’s time to deploy that cash elsewhere. Reevaluating your financial plan now could uncover opportunities you may otherwise miss.”
3. New Opportunities in Real Estate
The real estate market may benefit from the rate cut, encouraging buyers who were waiting for relief to re-enter the market. However, homeowners with low-rate mortgages might hesitate to make changes.
“Some people are sitting on equity but aren’t eager to refinance or sell because they’re locked into low mortgage rates,” Jerrod explained. “But with shifting priorities—like working remotely and needing more space—a bit of relief might nudge them to explore new options.”
4. Job Market Boost
Lower borrowing costs are also designed to stimulate business expansion and innovation. “When companies can borrow for less, they can invest in growth, leading to hiring and new developments that strengthen the economy,” Jerrod explained.
This could help businesses rebuild momentum and create a more competitive job market, despite recent layoffs.
5. Financial Planning & Review
The rate cut offers a chance to assess your current financial priorities. “These fluctuations don’t necessarily need to be good or bad. What’s important is understanding how they affect you. That’s why this is a great time to re-evaluate,” Jerrod advised. “We review our clients’ plans annually and during major life changes. Your financial plan isn’t something you set and forget—it’s meant to evolve with you.”
What’s Next?
The Fed’s recent rate cut impacts everyone differently. If you haven’t reviewed your financial plan in a while, now is the time to do so. Even a small adjustment could help you stay on track and uncover opportunities to achieve more.
At Vance Wealth, we’re here to help. Our team is ready to walk you through how these changes affect your financial goals and ensure your plan is aligned with your priorities. Contact us to schedule your complimentary discovery call today.
Source: Reuters, “What Does the Fed Rate Cut Mean for American Households?” Sept. 18, 2024.
Disclosures:
Vance Wealth, Inc. (“Vance Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Vance Wealth and its representatives are properly licensed or exempt from licensure. The information provided is for educational and informational purposes only and does not constitute advice. Vance Wealth does not provide tax or legal advice. You should contact your tax advisor and/or attorney before making any decisions with tax or legal implications.
