Get Ready for the Fed’s Next Moves: What to Expect and How It Affects Your Savings and Finances

Hey there, savvy savers! The latest Federal Open Market Committee (FOMC) meeting is happening this week, and you know what that means – we’ll soon find out if there will be another interest rate hike, or another pause. Buckle up, because we’ve got you covered with a quick preview of what to expect!

The much-anticipated two-day meeting kicked off on Tuesday, with the statement release scheduled for Wednesday, July 26th, at 2:00 pm EDT. And guess what? We’ll also get to hear from Fed Chair Powell during his post-meeting press conference. Exciting times, right?

Now, you might be wondering about those potential rate hikes. Well, after taking a pause in June, it’s looking highly likely that we’ll see a 25-bp (basis point) rate hike this July. The odds are incredibly high at 99.8% (thanks, CME FedWatch Tool!). But what about after July? Things might cool down as expectations grow that inflation will continue to ease. That could mean an end to rate hikes after this month, with odds as low as 28.0% for a higher rate on November 1st.

Curious about how this might impact your savings and investments? We’ve got you covered there too! With the yields of short-dated Treasuries experiencing gains, and longer-dated Treasury yields generally showing slight declines, we might expect to see more downward drift of those long-dated Treasury yields. That could mean some pressure on online banks to raise their savings account and short-term CD rates. And hey, with a little nudge from us, they might just do it!

Hold on, let’s talk numbers! If that 25-bp rate hike happens next week, the target federal funds rate (TFFR) would rise to 5.25%-5.50%, surpassing the peak of the 2004-2006 rate-hiking cycle. But don’t fret – while that may be bad news for borrowers there’s a silver lining for savers. Many smaller online banks are now offering savings account rates of 5% and above, so that’s some sweet encouragement for the major online banks to follow suit!

High yield savings are great but can move quickly, so what about taking a longer bet by buying CDs? We’ll be honest, we’re feeling a bit more cautious there. While we’ve seen some upward drift in rates recently, the general trend has been more downward. But remember, this is a dynamic financial world we’re in, and anything can happen. So, keep an eye on the trends, and if you spot a great deal, go for it! You never know when the rates might take a turn in your favor.

As we know, past rate hike cycles have often leaned towards short-term CDs and online savings accounts due to the dreaded inverted yield curve. But here’s the insider tip – locking into a long-term CD might prove handy when the Fed’s rate hiking cycle is winding down. Patience can pay off!

So, my dear friends, as we gear up for the Fed’s next moves, let’s stay informed and make smart choices together! Remember, we’ve got each other’s backs, and with a little help from Wellthi, we’ll keep moving towards those financial goals with confidence!

Stay tuned for more updates and happy saving, goal-crushers! 🚀💰

DIG DEEPER

  1. CME FedWatch Tool: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
  2. Treasury Yield Data: https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics
  3. Online Bank Rates Comparison: https://www.cnbc.com/select/best-high-yield-savings-accounts/
  4. 5-year Online CD Index Chart: https://www.depositaccounts.com/cd/5-year-cd-rates.html

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