The Federal Reserve Board decided to keep interest rates unchanged after its meeting on June 11th and 12th, 2024. The target for the federal funds rate has remained unchanged at 5.25% to 5.5% since July 2023.
To combat inflation, interest rates have been raised 11 times between March 2022 and July 2023. Inflation has been falling, but the Fed has signaled it wants more positive data before pulling the trigger.
In March 2024, the central bank predicted it would cut interest rates by three quarter-points by the end of the year, but that certainty has faded as time has passed.
The FOMC meets eight times a year to discuss whether to adjust the federal funds rate, the benchmark that governs overnight lending between commercial banks. The 12-person group, led by Federal Reserve Chairman Jerome Powell, considers economic factors such as inflation, employment and borrowing rates.
The FOMC has met four times so far in 2024 but has refused to change interest rates. Here are its remaining meetings this year:
July 30th and July 31st, 2024 September 17th and September 18th, 2024 November 6th and November 7th, 2024 December 17th and December 18th, 2024
Amy Hubble, chief investment adviser at Radixx Financial, told CNBC Select that she doesn't expect a rate hike in July.
“But that doesn't mean the Fed is not doing anything,” Hubble said. “They're doing their job. There's no weakness in the job market, which is the Fed's number one target, but inflation is still above 3 percent, which is higher than we'd like. Inflation is starting to come down, but we'll have to wait and see how the summer goes.”
The Federal Reserve requires banks and other depository institutions to hold 10% of their deposits as reserves, and banks borrow and lend money to each other to stay as close to that requirement as possible without falling below it.
The FOMC sets the interest rate that banks can charge each other (the federal funds rate), which then adjusts the interest rates they charge consumers.
The federal funds rate has been at 5.25% to 5.50% since July 2023. This is the highest level since January 2001, when it soared to 6.00% after the dot-com bubble burst.
“When the federal funds rate goes down, it's going to affect everything a little bit differently and to a different extent,” Hubble said. “Interest rates on CDs and other short-term cash instruments like money market and bank savings rates are going to go down almost immediately.”
She added that rather than a large cut, it would be a trickle of 0.25 percentage points over several years.
Changing mortgage rates is more complicated, as credit score and loan terms play a large role.
“These rates don't necessarily move perfectly in tandem with cuts in the federal funds rate,” Hubble said, “but it's still reasonable to assume that lower federal funds rates mean lower mortgage rates.”
Explore adjustable rate mortgages
In a pre-downturn environment, Hubble advises clients to consider adjustable-rate mortgages (ARMs). These mortgages start out with a fixed interest rate for a set period of time. However, once that period is over, the interest rate changes at set intervals.
For example, a 7/1 ARM means you'll have a fixed interest rate for the first seven years, with your interest rate adjusting annually after that. With a good chance of mortgage rates falling, an adjustable rate may be attractive.
“While we don't know the exact timing, the Fed has signaled that it is done with its rate-hiking cycle,” Hubble said. “We don't expect mortgage rates to rise from here.”
PNC Bank is your first choice for ARMs, offering 5/1, 7/1, and 10/1 mortgage options, as well as adjustable interest rates available on conforming, VA, and FHA loans. PNC offers grants of $5,000 toward down payment or closing costs to homebuyers who meet income or location requirements.
PNC Bank
Annual Percentage Rate (APR)
Apply for a personalised rate online. Fixed and adjustable rate mortgages included.
Types of Loans
Conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, HELOCs, community loans, medical professional loans.
Conditions Required credit Minimum down payment
0% if you advance a USDA loan
Improve your credit score
If you've been waiting for interest rates to drop so you can apply for a mortgage or personal loan, now's the time to get ready. Your credit score is one of the biggest factors lenders use to determine whether you'll be approved and what interest rate you'll be offered. While a credit score of 620 is considered the benchmark for a typical mortgage, raising your score to at least 750 may qualify you for the most competitive interest rates.
Pay your bills in full and on time. Payment history is the most important factor in your credit score (and helps avoid late fees and interest). Request a credit limit increase. While a strong record of on-time payments and/or increased income are usually required, if you can increase your credit limit and leave your balance alone, it can lower your credit utilization ratio, which makes up 30% of your FICO® Score (but don't think of extra credit as a green light to spend). Hold off on new credit lines. Applications require hard queries, which can hurt your credit. If approved, they will lower your average account age.
eCredable Lift® is a paid service that submits your past due utility bills to TransUnion, one of the three major credit reporting agencies. Utility companies don't typically appear on your credit reports, so paying on time doesn't help build credit.
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Trustworthy
Fee
eCredable Lift® $9.95/month
eCredable LiftLocker™ $14.95/month
Affected credit reports Credit scoring model used
FICO® Score 8 (or higher) or VantageScore® 3 (or higher)
Results vary, see website for details.
*Experian Boost™ also adds household payments to your report, but it's free and works with Experian instead of TransUnion. The company says that users who improve their FICO score see an average increase of 13 points.
Experian Boost™
Cost Average Credit Score Increase
Results vary, but 13 points
Affected credit reports Credit scoring model used
Results may vary, see website for details.
Here are some financial options to consider if the Federal Reserve cuts interest rates.
Refinancing your mortgage
If you bought a home when mortgage rates peaked in 2023, now is a good time to consider refinancing. Mortgage rates should fall after the Fed cut the federal funds rate.
As one of CNBC Select's top recommended banks for mortgage refinancing, Ally Bank offers fixed and adjustable rate terms with no application, loan, processing or underwriting fees — which could save you thousands of dollars.
Ally Home
Annual Percentage Rate (APR)
Apply for a personal rate online. Fixed and adjustable rate mortgages included.
Types of Loans
Conventional loans, HomeReady loans, jumbo loans
Conditions Required credit Minimum down payment
3% if you proceed with a HomeReady loan
Refinance your student loans
Interest rates on student loans should also fall after the FEC implements the cuts. Borrowers have been feeling the squeeze since their three-year grace period for payments expires in October 2023.
SoFi offers terms up to 20 years for refinancing your student loans, and you can save 0.25% off your interest rate if you sign up for automatic monthly payments.
Sophie
Eligible Borrowers
Undergraduates, graduate students, parents, and medical professionals
Loan amount
Minimum $5,000 (or state dependent); maximum up to cost of attendance
Loan Terms
Ranges from 5 to 15 years, up to 20 years for refinanced loans
Type of loanDo I need a co-signer?Do you offer student loan refinancing?
High interest credit card payments
If interest rates fall, your credit card annual percentage rate (APR) will likely fall as well, making it easier to pay off your balance.
So, make it a priority to make larger payments now before interest rates rise again later.
Find the best checking account for you
FAQ
When will interest rates fall?
The Federal Reserve has signaled it may cut interest rates as soon as late in 2024. Certified financial planner Amy Hubble told CNBC Select she doesn't expect a rate cut until at least September.
When is the next Fed meeting?
The Federal Open Market Committee's next meetings will be held on July 30 and July 31, 2024.
If the Federal Reserve lowers interest rates, what will happen to mortgage rates?
A cut in the federal funds rate will likely mean lower mortgage interest rates, but that might not happen right away. Your credit score and the terms of your loan will also affect the rate you're offered.
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At CNBC Select, we work with professionals who have the expertise and authority that comes from their relevant training and experience. For this article, we interviewed Amy Hubble, Principal Investment Advisor at Seattle-based Radix Financial. A certified financial planner, Hubble earned her PhD in Consumer Economics from the University of Georgia.
CNBC Select's mission is to provide our readers with quality service journalism and comprehensive consumer advice to help them make informed decisions about their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns commission from affiliate partners on many offers and links, we create all content without input from our commercial team or any outside third parties and we pride ourselves on our journalistic standards and ethics.
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*Results may vary. You may not see an improvement in your score or approval rate. Not all lenders use Experian credit files and not all lenders use scores that are impacted by Experian Boost.
Editor's note: Any opinions, analyses, reviews or recommendations expressed in this article are solely those of the Select editorial staff and have not been reviewed, approved or endorsed by any third party.