The influence of the Federal Reserve on your personal finances
The Federal Reserve, the nation's central bank and most powerful economic institution, made a quarter-point cut to interest rates on Wednesday, lowering the federal funds target rate to a range of 4.00% to 4.25%. This move comes amidst a moderation in economic activity in the first half of the year, as stated by the Federal Reserve.
While job gains have slowed, and inflation is 'somewhat elevated,' according to the Federal Reserve, personal finance expert McBride is urging people to stay focused on saving for long-term goals, such as retirement and college funds, even when the mortgage rates are uncertain.
McBride emphasises the importance of starting early with savings for long-term goals, as it helps everyone stay prepared for economic changes, regardless of the Federal Reserve's decisions. The expert also suggests boosting savings to be prepared for potential economic uncertainties.
In addition to saving, McBride advises tackling high-cost debt, like credit cards or home equity lines, when mortgage rates are either high or low. This strategy can better position consumers to weather economic uncertainties, according to McBride.
However, McBride does not provide any new information about the Federal Reserve's assessment of the economy. The next Fed meeting to potentially adjust mortgage rates is scheduled for October 28-29, 2025. The target range for mortgage rates, after the cut, is now 4.00-4.25 percent.
While lower mortgage rates can stimulate the economy when it is weak, higher mortgage rates are used to slow the economy when inflation is an issue. The Federal Reserve uses mortgage rates as a tool to influence the economy.
Interestingly, many consumers are considering making major financial moves, such as buying a home, due to lower borrowing costs. However, McBride does not mention any changes in the target range for mortgage rates or discuss the impact of lower borrowing costs on consumer behavior, beyond paying down debt and boosting savings.
It's a critical time for consumers to reassess their financial strategies, with the current economic landscape providing both challenges and opportunities. McBride's advice to focus on saving and managing debt can help consumers navigate these uncertain times and secure their financial futures.
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