If you have been tired of rising interest rates, then the Fed Dec 2023 meeting was a welcome event for you. The Fed decided to keep rates steady, for now. This means the current Fed rate is still 5.25-5.5% That also means the Prime Rate is going to stay at 8.5%. If you have no idea what that means, I talk about the prime rate extensively
Here is what's happening with loans: the Fed did indicate that in 2024 there will probably be 3 rate cuts of a quarter point each. Here is what that means for the average consumer: If you currently have a balance on a line of credit, like a HELOC or a credit card, the rate is projected to come down by 75 basis points a year from now. So, if your current variable APR is 10%, it might be 9.25% in 12 months. If that number isn’t the final result, it should be close. Also, new loan rates should be coming down next year, including but not limited to mortgages and auto loans. As always, if you already have an existing fixed rate loan, then any change in interest rates abroad won't affect your loan. This only applies to brand new loans and loans you haven't taken yet.
What about any savers who are reading this? What happens with your savings account? If you are saving money in things like savings accounts, money markets, CDs, or fixed annuities, new money rates will be coming down soon. As of Dec 2023, we are probably at the peak of those rates. When your CD matures next year, it will likely renew at less than what it is today. It’s nothing to get upset about because inflation is coming down too, and that’s a good thing. Plus, you are likely familiar with this interest rate cycle, especially if you're a regular purchaser of CDs. Rates go up and rates go down. It happens again and again. Be glad for the increase in rate compared to 2021. Keep saving your money while rates drop. They'll rise again at some point, even if it is several years down the road.
That is the skinny on the Dec 2023 Fed meeting. As new meetings are held and new announcements are made, I'll keep you posted.
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