Federal Reserve rate cuts: What to expect and how to prepare

Interest rates have been a major topic of conversation this year. With rates having held at their highest point in decades, 2024 has given savers a chance to earn fantastic returns on cash deposits.

Now, with inflation holding steady, Fed rate cuts for 2024 look more than likely. 

What will rate cuts mean for your savings and how can you prepare yourself in advance of interest rates going down? We’re sharing our tips for making sure you’re ready for any interest rate cuts this year.

The federal funds rate, also known as the Fed rate, is the target rate set by the Federal Open Market Committee. This rate determines the interest rate that banks in the United States pay one another to borrow or lend funds overnight.

After a series of interest rate hikes, the Federal Open Market Committee has held interest rates at their highest in decades for the past year in an effort to stem inflation. Now, with inflation holding below 3%, many experts expect the Fed to cut interest rates at their meeting on September 18.

The current federal funds rate is at 5.25% to 5.50%. Many economists predict this first cut to be by 25 basis points or 0.25%, which would bring rates back to where they were in May 2023, with a series of cuts to follow this year.

Some experts believe that a higher rate cut of 50 basis points may be on the table. Even so, this would reduce rates only back to their March 2023 levels.

“Rate cuts have been predicted throughout the year, but never with as much certainty as we’re seeing now,” says Ben McLaughlin, Chief Marketing Officer & President of Raisin.

Once the Federal Reserve begins to decrease rates, you will likely start to see lower interest rates offered by banks on cash savings products.

“If the Fed cuts rates by 25 to 50 basis points, or 0.25% to 0.50%, savers with cash in variable-rate products like high-yield savings accounts should expect to see banks and credit unions adjust their rates accordingly,” says McLaughlin.

“The good news,” McLaughlin continued, “is that while rates may not be as high as they’ve been over the past year, they’ll still be 20 times higher than they were just a few years ago.”

Recent stock market volatility coupled with market uncertainty around the upcoming presidential election mean that cash deposits remain a safe, reliable way to grow your cash.

One of the easiest ways for savers to prepare for upcoming rate cuts is to lock in rates on certificates of deposit. Securing today’s top rates ahead of any Fed rate cuts would allow you to keep earning at current highs — even in a cooling rate environment.

Using the Raisin platform, a single account lets savers find, fund, and manage a full suite of savings products — including high-yield CDs and no-penalty CDs — from a network of 70+ partner banks and credit unions.

Take a look below to see some of the current top CD offers and get prepared for rate cuts by locking in your rate in just a few minutes.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.