Interest rates likely unchanged as inflation cools

The Federal Reserve is expected to hold interest rates steady Wednesday, signaling that a nearly two-year streak of hikes may be ending as inflation cools.

If there is no change, the central bank’s key short-term rate would remain at 5.25% to 5.5% for the third month in a row.

• The Fed’s decision will be announced at 2:00 PM ET, Wednesday, Dec. 13.
• Fed Chair Jerome Powell is expected to speak at 2:30 PM ET following the central bank’s final meeting of the year.
• Powell’s remarks will likely give insight into whether the Fed will start cutting interest rates in 2024, reducing borrowing costs for consumers as well as businesses.

When is the Fed meeting today?

The Fed is meeting Dec. 12 and 13th, and will announce its interest rate decision at 2:00 PM ET Wednesday.

Learn more: Best current CD rates

Savings account impact of high rates

The upside to the Fed’s string of rate hikes has been that consumers were able to earn good interest on their savings for the first time in years. Even when the Fed leaves interest rates unchanged, savers can do well.

Unfortunately, most account holders aren’t making the most of that potential opportunity.

Roughly one-fifth of Americans who have savings accounts don’t know how much interest they’re earning, according to a quarterly Paths to Prosperity study by Santander US, part of the global bank Santander. Among those who did know their account’s interest rate, most were earning less than 3%.

But consumers have time to make a change that could enable them to make more from their savings.

“We’re still a long way from (the Fed) beginning to cut rates,” said Greg McBride, chief financial analyst at financial services platform Bankrate.  “This is great news for savers, who will continue to enjoy inflation-beating returns in the top-yielding, federally insured online savings accounts and certificates of deposit. For borrowers, interest rates staying higher for a longer period underscores the urgency to pay down and pay off costly credit card debt and home equity lines.”

Amid inflation, Americans seek higher credit card limits

The string of Fed rate hikes that began in March 2022 has made it costlier for consumers to borrow as interest rates on credit cards and other loans increased dramatically.

At the same time, inflation has made daily needs more expensive, pushing more Americans to lean on credit cards to get by. But lenders have become more reluctant to issue new cards, so in the midst of the holiday season, more shoppers are seeking higher credit limits, experts say.

In October, the application rate for higher limits rose to 17.8% from 11.2% in the same month the previous year, and from 12.0% in 2019, New York Fed data showed.

For some consumers, a higher limit on a card they already have is about their only option.

“After COVID, inflation and interest rates went out of control … people have less emergency funds for car repairs or buying presents,” said Brandon Robinson, president and founder of JBR Associates, which specializes in retirement strategies. “What they’re doing is using more credit card utilization – over 30% or well over 50% of their credit card allowance – and then can’t get approved for another card because their credit rating is down.”

Inflation is leading more Americans to work multiple jobs

The number of Americans working at least two jobs is at its highest peak since before the COVID-19 pandemic, according to federal data, an uptick that may reflect the financial pressure people are feeling amid high inflation.

Almost 8.4 million people had multiple jobs in Octoberthe Labor Department said, a figure that represents 5.2% of the laborforce, the highest percentage  since January 2020.

“Paying for necessities has become more of a challenge, and affording luxuries and discretionary items has become more difficult, if not impossible for some, particularly those at the lower ends of the income and wealth spectrums,” Mark Hamricksenior economic analyst at Bankrate, told USA TODAY in an email.

People may also be moonlighting to sock away cash in case they’re laid off since job cuts typically peak at the start of a new year.

Current federal interest rate

The current interest rate is 5.25% to 5.5%. It’s expected that the Fed will announce Wednesday the rate has been left unchanged, for the third consecutive month.

Fed decision today:Fed expected to stand pat on interest rates but forecast just two cuts in 2024: Economists

Leaving savings behind:Many Americans are missing out on high-interest savings accounts. Don’t be one of them

When will Fed meet?:What is the Federal Reserve’s 2024 meeting schedule? Here is when the Fed will meet again.

Dow Jones

As of 10:55 AM ET, the Dow Jones Industrial Average was up 0.07% and the S&P 500 ticked up 0.20% Wednesday ahead of the Fed’s rate decision in the afternoon.

Mortgage rates are falling. So is it time to buy?

It depends.

First of all, the Fed doesn’t directly set mortgage rates, but its actions have an impact. For instance, when the central bank was steadily boosting its key rate, the yield on the 10-year treasury bond went up as well. Because those bonds are a gauge for the interest applied to an average 30-year loan, mortgage rates increased.

But over the past six weeks, mortgage rates have been declining,  averaging 7% for a 30-year fixed mortgage. That’s down from almost 7.8% at the end of October, according to data released by Freddie Mac on Dec. 7.

That may be giving some wannabe homeowners the confidence to start house hunting.  For the week ending Dec. 1, mortgage applications rose  2.8% from the prior week, according to the Mortgage Bankers Association.

“However, in the big picture, mortgage rates remain pretty high,” says  Danielle Hale, senior economist for Realtor.com.  “The typical mortgage rate according to Freddie Mac data is roughly in line with what we saw in August and early to mid-September, which were then 20 plus year highs.”

So, many potential buyers may still need to sit on the sidelines, waiting for rates to drop further, says Sam Khater, chief economist for Freddie Mac. Hale and many other experts believe mortgage rates will dip next year.

Interest rate projection 2024

The Fed is expected to cut interest rates next year, though markets and economists disagree about how many rate cuts there will be.

Futures markets forecast there will be four or five rate cuts in 2024, amounting to a quarter of a percentage point each. The cuts, they predict,  should start by spring, and ultimately drop interest rates as low as 4% to 4.25%.

But core prices, which leave out the volatile costs of food and energy and are the metric followed more closely by the Fed, ticked up 0.3% in November, higher than the 0.2% increase the month before. That might make the Fed more hesitant to nip rates in the immediate future.

Goldman Sachs and Barclays expect there to be only two rate decreases in 2024. And Fed Chair Jerome Powell has cautioned in recent public remarks that it was “premature” to talk about rate cuts.

November inflation report

Inflation dipped slightly last month, with falling gas prices mitigating the impact of rising rents.

Consumer prices overall increased 3.1% from a year earlier, slightly below the 3.2% rise in October, according to the Labor Department’s consumer price index. That slower pace moves the inflation rate nearer to the level, reached in June, that was the lowest in over two years. Month over month, prices increased a slight 0.1%.

Core prices, however, which leave out the more erratic costs of food and energy and which are more closely monitored by the Fed, increased 0.3% in November after rising 0.2% the previous month. That means core inflation’s yearly increase remained at 4%, though it’s the lowest level since September 2021.