Interest rate outlook for remainder of 2024

The Federal Reserve has announced its decision to keep interest rates steady following its meeting on June 11 and 12, 2024. The federal funds target rate has been maintained at a range of 5.25% to 5.5% since July 2023, after undergoing several increases to combat inflation between March 2022 and July 2023. While inflation has somewhat subsided, the Fed is waiting for more positive economic data before considering further rate adjustments.

In March 2024, the central bank had projected three quarter-point cuts by the end of the year. However, as time progresses, the certainty of these cuts has become less definite. The Federal Open Market Committee (FOMC) convenes eight times annually to deliberate on potential modifications to the federal funds rate, which influences overnight lending between commercial banks. Factors such as inflation, employment, and borrowing rates are taken into account during these discussions led by Federal Reserve Chair Jerome Powell.

With four meetings already held in 2024 without any changes to rates, the remaining meetings scheduled for this year are in July, September, November, and December. Despite the absence of any anticipated rate hikes in July, it is noted that the Fed remains active in fulfilling its duties, especially in terms of monitoring job market conditions and inflation rates.

Looking at the potential scenario of interest rates decreasing, it is important to understand the impact it may have on various financial aspects. A reduction in the federal funds rate set by the FOMC would affect the rates at which banks lend to each other, subsequently influencing interest rates for consumers. While short-term investments like CDs, money markets, and bank savings accounts are expected to see immediate rate decreases, mortgage rates may respond differently due to factors like creditworthiness and loan terms.

As interest rates adjust, it is crucial for individuals to stay informed about how these changes could impact their financial situations. By staying attuned to updates from the Federal Reserve and developments in the economy, consumers can make informed decisions regarding borrowing, saving, and investing.

Expect interest rates to remain fairly constant for the balance of 2024 with potential decreases in Q2 of 2025.