For the first time since 2020, the Federal Reserve recently cut interest rates and signaled that more are to come. The stock markets are happy (at least for the moment) – but what does it mean for your workers’ financial health?
Well, it depends.
The Fed, the nation’s central bank, cut the fed funds rate, a key overnight bank lending rate, by half a percentage point, to a range of 4.75% to 5.25%. As we’ve seen in recent days, the stock markets typically rise when interest rates are lowered – seeing that as a positive for business investment – and, sure enough, stock markets rose to new highs following the announcement. Indeed, the Fed ostensibly chose to lower interest rates as a way of heading off potential weakness in the economy. That’s likely been good news for your workers’ 401(k) or 403(b).
It’s also likely good news if they’ve been thinking about buying or refinancing a house as lower interest rates generally mean lower mortgage rates/cost, as well as purchases like a new or used car. It could also be good news for interest on debt or credit cards.
On the other hand, lower interest rates likely mean that bank savings accounts, money market funds, and certificates of deposit (CDs) will pay less interest.
Ultimately, whether the rate cut (and more are anticipated in the not-too-distant future) is a positive or negative will depend on their personal situation – but it’s a good time to encourage them to rethink and possibly make changes in their financial situation.
That’s Wella’s Way!