Interest rates have become a highly visible issue with news stories about rate changes almost every day. Much of the press coverage concerns the Federal Reserve and its chairperson, Jerome Powell. Jerome Powell became chairman when Janet Yellen retired in early 2018.

The Federal Open Market Committee (Fed) monitors the economy and makes changes to the key “overnight loan” rate that influences interest rates throughout the economy. By adjusting this rate, they try to keep inflation under control and stimulate long-term economic growth.

After cutting the fed funds rate to near 0% following the 2008 Financial Crisis, and keeping it

there through early 2015, the Fed began raising rates in December 2015. Through December 2018, they raised rates an additional five times to a range of 2.25% to 2.50%. Starting in August 2019, they began decreasing rates by a quarter point through October 2019 to a range of 1.50% to 1.75%. Then in response to recession fears due to the COVID-19 pandemic, the Fed again lowered the rate to near zero.

Due to supply chain problems and accumulated consumer demand following the pandemic, inflation surged to over 8% in 2022, prompting the Fed to quickly raise interest rates. It increased rates seven times in 2022 and four times in 2023, including four major rate hikes of .75% each, aiming for an eventual fed funds rate between 5% and 5.5%.

The Fed finally paused rate hikes in summer 2023, expecting a cooling period for inflation, which fell from its peak of 9% in summer 2022 to 3.1% in January 2024. The expectation is that the Fed will start cutting rates later in 2024 if it manages to get inflation under control.

Interest rates also play a major role in our economy and in our daily lives, especially when it comes to borrowing.

Develop a Borrowing Strategy

Using credit wisely can be a key part of your personal and business financial plans.

• Use common sense. Never borrow what you can’t repay. Prioritize your borrowing based on long-term value. Reserve some borrowing capacity for emergencies.
• Consider all the terms. Borrowing can be confusing. Review all the terms and conditions before you sign any credit application.
• Get help if you need it. If your borrowing gets out of control, take immediate steps to solve the problem. Contact lenders to work out a repayment plan. Quit using (or cut up) credit cards. Seek the help of a qualified credit counselor.

Where Interest Rates are Headed

Interest rates have risen from their recent historical low levels. They may go higher, or they may not. Accurate predictions of future interest rate movements are almost impossible. To take advantage of XXXX’s current low rates, here are two ideas to consider:

Real Estate Loans

Mortgage rates are low, as are many home equity loan rates. Now is an excellent time to get a mortgage on a new home, refinance an existing mortgage, or use a home equity loan to consolidate your debt at a lower rate (and possibly enjoy tax benefits). XXXXX offers mortgage programs to suit almost any need. Visit our website – XXXX.com - to review our programs and see the current rates. You can even apply online.

Credit Cards

Not all credit cards are the same. Differences in fees, interest rates, and benefits should all be considered when choosing the card that makes the most sense for you. If you carry balances and pay interest on them, having a card with lower interest rates can save you hundreds or even thousands of dollars each year. For example, with an average balance of $5,000, the difference between an 8% and 18% rate amounts to $500. It’s important to compare rates, so we invite you to look at our low rates. Visit our website – XXXX.com – and see how our credit card can help you save money.

Note

This article was written with the assumption that you would customize it with your financial institution’s name in the areas marked with bold XXXXX.