Latest news with #FedWatch
CNBC
2 days ago
- Business
- CNBC
3 key money moves to consider while the Fed keeps interest rates higher
In minutes released this week from the Federal Reserve May meeting, central bank policymakers indicated that an interest rate cut isn't coming anytime soon. Largely because of mixed economic signals and the United States' changing tariff agenda, officials noted that they will wait until there's more clarity about fiscal and trade policy before they will consider lowering rates again. In prepared remarks earlier this month, Fed Chair Jerome Powell also said that the federal funds rate is likely to stay higher as the economy changes and policy is in flux. The Fed's benchmark sets what banks charge each other for overnight lending, but also has a domino effect on almost all of the borrowing and savings rates Americans see every day. Since December 2024, the federal funds rate has been in a target range between 4.25%-4.5%. Futures market pricing is implying virtually no chance of an interest rate cut at next month's meeting, and less than a 25% chance of a cut in July, according to the CME Group's FedWatch gauge. It is more likely the Federal Open Market Committee won't lower its benchmark rate until the Fed's September meeting. With a rate cut on the backburner for now, consumers struggling under the weight of high prices and high borrowing costs aren't getting much relief, experts say. "You don't have to wait for the Fed to ride to the rescue," said Matt Schulz, chief credit analyst at LendingTree. "You can have a far, far greater impact on your interest rates than any Fed rate cut ever will, but only if you take action." Here are three ways to do just that: With a rate cut likely postponed until September, the average credit card annual percentage rate is hovering just over 20%, according to Bankrate — not far from last year′s all-time high. In 2024, banks raised credit card interest rates to record levels, and some issuers said they'll keep those higher rates in place. "When interest rates are high, credit card debt becomes the most expensive mistake you can make," said Howard Dvorkin, a certified public accountant and the chairman of Rather than wait for a rate cut that may be months away, borrowers could switch now to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a lower-rate personal loan, said LendingTree's Schulz. "Lowering your interest rates with a 0% balance transfer credit card, a low-interest personal loan or even a call to your lender can be an absolute game-changer," he said. "It can dramatically reduce the amount of interest you pay and the time it takes to pay off the loan." Start by targeting your highest-interest credit cards first, Dvorkin advised. That tactic can create an added boost, he said: "Even small extra payments can save you hundreds in interest over time." Rates on online savings accounts, money market accounts and certificates of deposit will all go down once the Fed eventually lowers rates. So experts say this is an opportunity to lock in better returns before the central bank trims its benchmark, particularly with a high-yield savings account. "The best rates now are around 4.5% — while that's down about a percentage point from last year, it's still better than we've seen over most of the past 15 years," said Ted Rossman, senior industry analyst at "It's well above the rate of inflation and this is for your safe, sleep-at-night kind of money." Here's a look at other stories impacting the financial advisor business. A typical saver with about $10,000 in a checking or savings account could earn an additional $450 a year by moving that money into a high-yield account that earns an interest rate of 4.5% or more, according to Rossman. Meanwhile, the savings account rates at some of the largest retail banks are currently 0.42%, on average. "If you're still using a traditional savings account from a giant megabank, you're likely leaving money on the table, and that's the last thing anyone needs today," said Schulz. Those with better credit could already qualify for a lower interest rate. In general, the higher your credit score, the better off you are when it comes to access and rates for a loan. Alternatively, lower credit scores often lead to higher interest rates for new loans and overall lower credit access. However, credit scores are trending down, recent reports show. The national average credit score dropped to 715 from 717 a year earlier, according to FICO, developer of one of the scores most widely used by lenders. FICO scores range between 300 and 850. Amid high interest rates and rising debt loads, the share of consumers who fell behind on their payments jumped over the past year, FICO found. The resumption of federal student loan delinquency reporting on consumers' credit was also a significant contributing factor, the report said. VantageScore also reported a drop in average scores starting in February as early- and late-stage credit delinquencies rose sharply, driven by the resumption of student loan reporting. Some of the best ways to improve your credit score come down to paying your bills on time every month and keeping your utilization rate — or the ratio of debt to total credit — below 30% to limit the effect that high balances can have, according to Tommy Lee, senior director of scores and predictive analytics at FICO. In fact, increasing your credit score to very good (740 to 799) from fair (580 to 669) could save you more than $39,000 over the lifetime of your balances, a separate analysis by LendingTree found. The largest impact comes from lower mortgage costs, followed by preferred rates on credit cards, auto loans and personal loans.
CNBC
5 days ago
- Business
- CNBC
Don't expect the market to go anywhere this summer, says JPMorgan
Looking for another leg higher in stocks this summer? JPMorgan thinks investors should pump the breaks. Fabio Bassi, the bank's head of cross-asset strategy, warned the S & P 500 could "remain rangebound, with limited short-term upside." He added: "The rally to our bull case scenario of 5,800 for S & P 500 has played out, but from here we expect a consolidation and range-bound dynamic." Indeed, the S & P 500 has surged 20% since hitting an intraday low on April 7, as investor sentiment recovered after the "liberation day" tariff shock that sent global markets tumbling. The benchmark closed Friday's session at 5,802.82 (U.S. markets were closed Monday due to the Memorial Day holiday). .SPX YTD mountain SPX year to date The protectionist U.S. trade stance raised concern of persistent inflation — leading investors to lower their expectations for Federal Reserve interest rate cuts. CME Group's FedWatch tool shows traders see the central bank lowering rates twice in 2025. They expected at least three rate cuts when the year began. "The revival of the 'higher for longer' narrative, coupled with reduced tariff concerns, is likely to constrain the expansion of equity leadership," Bassi wrote. "Investors are expected to continue paying a premium for high-quality growth companies, resulting in an unhealthy concentration within the tech sector and the Mag7." The strategist recommended clients hedge against potential downside by buying call options on the Cboe Volatility Index (VIX) , essentially betting Wall Street's "fear gauge" will rise. But Wall Street is set to begin the shortened trading week on a strong note. S & P 500 futures popped more than 1% after President Donald Trump delayed a 50% levy on European goods until July. However, those gains are likely short lived, if JPMorgan's assessment is correct. Elsewhere Tuesday morning on Wall Street, Barclays became the first shop on Wall Street to downgrade CoreWeave since its IPO. The bank lowered its rating on the stock to neutral from overweight. The stock nevertheless added another 4% in premarket trading. "With its voice-A.I platform, SoundHound is a direct play on the A.I revolution," analyst James Fish wrote.
Yahoo
20-05-2025
- Business
- Yahoo
Fed Officials Throw Cold Water On Hopes of a Summer Interest Rate Cut
The Federal Reserve is not likely to cut interest rates at its next two meetings in June and July, central officials said in interviews this week. The Fed has kept interest rates at a higher-than-usual level this year as it waits to see how President Donald Trump's tariffs will affect the economy. A weakening job market could push the Fed to lower rates, while surging inflation could force it to keep rates high. Tariffs could worsen both problems, posing a dilemma for the for when the Fed will cut interest rates keep getting kicked down the road. Several bank policymakers indicated in speeches and interviews this week that the Federal Reserve is unlikely to lower its key fed funds rate at its two meetings this summer. As of Tuesday afternoon, there was a 71% chance the Fed would keep its interest rates steady through its next two meetings, according to the CME Group's FedWatch tool. The predictions of the Fed's next moves are calculated based on fed fund futures trading data. That's a sharp reversal of expectations. As recently as a month ago, markets were pricing in more than a 90% chance of a rate cut by July. In an interview on MSNBC on Monday, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said he favored waiting at least through the end of the summer before making any monetary policy moves."There's a lot of uncertainty. I think we'll have to wait three to six months to start to see where this settles out," Bostic Bostic is not a voting member of the Federal Open Market Committee that decides interest rates, non-voting members speak at the Fed's policy meetings and can influence the outcome by participating in C. Williams, president of the Federal Reserve Bank of New York, laid out a similar timeline Monday when speaking at a conference of the Mortgage Bankers Association, Bloomberg reported.'It's not going to be that in June we're going to understand what's happening here, or in July,' Williams said, according to Bloomberg. 'It's going to be a process of collecting data, getting a better picture, and watching things as they develop.' Fed officials have indicated they're in the same boat as everyone else: uncertain of how President Donald Trump's tariff policies will change in the coming months, and how the economy will react to radically higher import taxes. Amid the fog of uncertainty, Fed officials have said the best move is to wait and see what happens. That attitude, repeated by multiple officials in speeches and interviews this week, has quashed expectations the Fed would resume the series of rate cuts it started late last year, putting downward pressure on borrowing costs for credit cards, car loans, and other officials must decide whether to keep the Fed funds rate high to smother the last embers of the post-pandemic inflation flare-up or cut rates to bolster the economy and prevent a surge in unemployment. Economic forecasts anticipate the tariffs will worsen both problems, potentially leaving the Fed in a addition, the White House has cracked down on immigration, Congress is working on a significant overhaul of the tax code, and federal regulators have relaxed rules on businesses—all developments with unknown effects on the economy. Alberto Musalem, president of the Federal Reserve Bank of St. Louis, became the latest official to repeat the "wait and see" mantra Tuesday when he spoke at the Economic Club of Minnesota. "The range of possible economic outcomes for the next few quarters is wide," said Alberto Musalem, president of the Federal Reserve Bank of St. Louis at the Economic Club of Minnesota Tuesday. "Major new trade, immigration, fiscal and regulatory policies could have a material impact on the economy in different ways and at different time horizons. As we get more clarity on these policies, the macroeconomic and monetary policy implications should become more evident." Read the original article on Investopedia
CBS News
14-05-2025
- Business
- CBS News
3 signs a HELOC makes sense right now
A HELOC offers homeowners one of the cheapest ways to borrow money right now. Getty Images/iStockphoto Your home equity could be a powerful financing source if used correctly. After years and perhaps decades of paying down your mortgage balance, the equity accumulated in the home can be used in a variety of ways. Either with a home equity loan, a cash-out refinance or even a reverse mortgage for older homeowners, this equity can be the difference between paying for large expenses at a cost-effective rate or reverting to high-rate options like credit cards and personal loans instead. One home equity borrowing product that appears especially attractive for homeowners in today's economic climate is a home equity line of credit (HELOC). With an average rate of 7.99% now, not only is a HELOC your cheapest home equity borrowing option right now, but it's also one of the cheaper ways to borrow money overall, with an average interest rate many percentage points lower than what's available with personal loans or credit cards. Still, with your home serving as collateral in these exchanges, you'll want to ensure that turning to a HELOC makes financial sense right now. One way to determine this is by looking at a few applicable signs. Below, we'll break down three signs that a HELOC could make sense for you right now. Start by seeing how low of a HELOC interest rate you'd be eligible for here. 3 signs a HELOC makes sense right now Here are three important signs supporting the use of a HELOC right now: Inflation is declining Inflation has dropped a long way from the 9.1% it was coming in at in June 2022. Now at just 2.3%, inflation has dropped in February, March and April and is closing in on the Federal Reserve's target 2% goal. When that happens, rate cuts could be in play. But lenders may start reducing their rate offers in anticipation of that increasingly likely formality, especially after this week's inflation reading showed a third consecutive monthly decline. And this is a good sign for both existing HELOC borrowers and prospective ones, as the line of credit comes with a variable rate subject to adjust monthly. So rates (and payments) here could soon become more affordable than they already are. Compare current HELOC rates and offers now. Interest rate cuts look likely The Fed has kept the federal funds rate frozen this year after issuing three cuts in a row in the final months of 2024. But that freeze could soon thaw, perhaps in the weeks to come, thanks to encouraging economic data points. According to the CME Group's FedWatch tool, there's around an 8% likelihood that rates will be cut in June when the Fed meets again but that prediction surges to 33% in July. And other economic news, like the next unemployment report or inflation reading for May, could increase that likelihood, as well. In other words, when rate hikes look likely, it may be a sign to stay away from variable-rate products like HELOCs. In the opposite circumstances, like now, however, it's a sign that they're more favorable for borrowers. Home equity levels are elevated A report released in March showed the average home equity amount sitting at $313,000. While that's down from the $327,000 in 2024, it still represents a substantial, six-figure sum of money to utilize. And, depending on the region of the country you live in now, there's a good chance that home prices will rise where you are, meaning that you'll have even more equity to utilize in the future. Even with the average home equity lender mandating that borrowers keep a healthy 20% equity buffer in the home, there's still plenty of money to utilize right now. And you can do so, with a HELOC, with a rate lower than many alternatives. The bottom line With inflation declining, the likelihood of interest rate cuts rising and home equity levels elevated in many parts of the country, multiple signs are pointing toward the benefit of using a HELOC now. Just remember not to overborrow, either. With your home serving as collateral and the risk of losing it to the lender if you're unable to repay all you've borrowed, it's critical to calculate your potential payments before acting. When you do, just make sure to do so against a variety of interest rate scenarios to ensure both short - and long-term affordability. Learn more about your HELOC options here.
CBS News
14-05-2025
- Business
- CBS News
Debt consolidation moves borrowers should make right now
The right debt consolidation approach is key in today's unique economic climate. Getty Images News this week that credit card debt balances are on the decline was a positive step in the right direction, both for the country and for individual cardholders. But it's only the first step in a lengthy journey. Credit card interest rates remain just under the recent record high of 23% and inflation and interest rates remain a concern, albeit more muted ones than they had been in the recent past. Still, if you built up a substantial credit card balance in recent years, it will require substantial work to reduce it now. One debt relief option that you may be considering now is debt consolidation. This typically occurs by taking out a new loan, often at a much lower interest rate than the ones you have with your credit cards. You then pay off the new, cheaper loan each month until you're paid in full. Not only will this reduce your interest costs, but it can simplify your debt approach by having a single bill to pay every four weeks versus multiple ones to worry about. That said, in the current economic climate, there are some specific, timely debt consolidation moves borrowers should strongly consider making right now. Below, we'll examine four to make soon. Start by seeing what debt consolidation loan rate you could qualify for here. Debt consolidation moves borrowers should make right now Here are four strategic debt consolidation moves borrowers should consider making currently: Take the initiative Waiting for the interest rate climate to cool significantly enough to reduce your credit card interest rates materially is not a strategy. Instead, that will just delay the work you already need to be involved in. The federal funds rate, after all, is just one factor that drives credit card rates. And it's unlikely to be cut until July, at the earliest, according to the CME Group's FedWatch tool and that cut is likely to be just 25 basis points. How much of that reduction will trickle down to your current credit card rate? Waiting, then, doesn't make sense when you have multiple ways to consolidate your high-rate credit card debt right now. Get started with a debt consolidation loan here. Shop for lenders All personal loans are not created the same, and not all lender rates and offers will be identical or even necessarily close to one another. So if you're thinking about taking out a debt consolidation loan to combine your outstanding credit card debt balances, it makes sense to shop around for rates and lenders. Consider getting quotes from at least three to determine who is truly offering the most cost-effective solution. But remember that your credit will be checked during this process, leading to a potential (but temporary) drop in your score. Determine the right approach You can find a debt consolidation loan on your own. Or you could use the resources a debt relief company offers and have the loan secured through them instead. There's no right or wrong answer as this determination will be a personal one, largely based on your preferences and current debt situation. But it's worth exploring debt consolidation loans via both. The expertise, knowledge and guidance a debt relief company can provide in the process could outweigh any minor cost-savings secured by taking the DIY approach. But you won't know which makes more sense without doing your research. Consider alternatives Secured or unsecured debt consolidation loans, whether taken out on your own or with the help of a debt relief company, are only two of your options, even if they're two of the primary ones. But it's also important to consider alternatives. A home equity line of credit (HELOC) has one of the lowest interest rates available across borrowing products this May and it can easily be used to consolidate your debt. A home equity loan, which has a similarly low rate, could also be effective. While both will require you to use your home as collateral, that may be a worthwhile exchange if it means paying less in interest each month. So consider exploring these options, too. The bottom line A debt consolidation loan, whether secured on your own or via a debt relief company, could provide the critical financial relief you need from your current, high-rate credit card debt. But take the initiative now, be sure to shop for lenders and take the time to determine if consolidating your debt with your accumulated home equity could be more advantageous. By making these moves now, you can put yourself on a more secure footing and work toward regaining your financial freedom, perhaps sooner than you initially thought possible.
