Maximize your money before the Fed’s decision next week.
With the economic headlines full of tariffs, layoffs and unrelenting high prices, Federal Reserve drama may not seem terribly relevant.
But the central bank affects your money in more ways than you might realize. From how much you pay on your debt to how fast your savings grow, the Fed’s actions have real consequences for your wallet.
At its next meeting July 29-30, the Fed is expected to hold interest rates steady, which should keep savings rates (and borrowing rates) high for the time being. It could begin cutting rates as soon as September, however, so you only have a small window to make some strategic moves with your money.
Read more: Savings Rates Could Drop This Fall. What to Do Before the Fed Makes a Move
Make these 4 money moves now
Make the most of the Fed’s upcoming decision by doing these things ASAP.
✅ Open a certificate of deposit
CDs are unique deposit accounts that come in terms ranging from a few months to several years. You need to leave your money in the CD for the entire term to avoid early withdrawal penalties. In exchange, the bank or credit union pays you a fixed return based on the interest rate in effect when you open the CD. Some of the best CDs today offer annual percentage yields of up to 4.5%.
Because the Fed is expected to cut rates in the fall, locking in a higher APY now can protect your future earnings if rates drop. Though banks tend to follow the Fed’s lead when setting CD rates, APYs have already started falling and will likely drop more in the fall.
“Knowing the Fed would like to get two interest rate cuts in before the end of the year, I would anticipate both CDs and savings accounts to begin offering less interest in the near term,” said Dana Menard, CFP and lead financial planner at Twin Cities Wealth Strategies. “If you do not need to access the funds, I would lock in the higher rates being offered today.”
✅ Open a high-yield savings account
A CD is a great home for money you don’t plan to spend right away. But what about your emergency savings? You’ll want to keep those savings liquid while still earning the most interest you can on them.
High-yield savings accounts, often provided by online banks, offer far better returns than traditional savings options available at major banks. The best savings accounts pay at least 10 times the national average savings rate.
Although there may be withdrawal limits, you can continue adding money to your high-yield savings account and keep your funds accessible when you need them.
The interest rates on high-yield savings accounts are variable, which means they tend to fall when the central bank makes interest rate reductions.
“We’ve already seen some of the top offers come and go,” said Taylor Kovar, certified financial planner and CEO of 11 Financial. “Most banks probably won’t raise rates unless the Fed gives them a reason to. So what we’re seeing now is probably as good as it’s going to get for a while.”
✅ Hold off on significant purchases
If you’re thinking about financing a new car or other large purchase, consider waiting until the Fed begins cutting rates again to avoid high interest charges.
If you’re in the market for a new home, you should know that borrowing rates for home loans are expected to stay high. Mortgage rates are only indirectly related to the Fed’s monetary policy, and experts don’t expect this year’s interest rate adjustments to bring them down significantly.
✅ Focus on paying down any debt
Paying down your credit cards and other high-interest debt is a good move in any rate environment but especially while interest rates remain high.
High-interest debt can hamper your financial stability. When you owe a large amount of interest on credit or loans, that money is no longer free for savings, investments or daily expenses.
You may want to consider a debt consolidation loan to combine your outstanding debt at a lower interest rate. Search for a reputable lender you’re interested in working with so you can apply when interest rates get cut later this year.
You can’t control what the Fed does with interest rates, but you can take some smart financial steps to make the most of its decisions.
