Clark Biweekly 11 2 23

💵 Where Are Interest Rates Headed in the Next Year?

The Fed didn’t hike interest rates this week. It marks back-to-back meetings with no rate hikes. The target rate has remained 5.25 to 5.50% since July 26.

Ho-hum, right?

• Interest rates on credit cards remain at all-time highs (well above 20%).

• The average 30-year mortgage rate is more than 8%.

• The average auto loan interest rate for a 48-month loan on a new car is more than 7.5%.

• New federal student loans charge 5.50%.

It’s great if you want 5% on your high-yield savings. If you’re looking to borrow money in any way, you’re probably saying wake me up when the Fed actually cuts rates.

When will that happen, exactly?

Right now, the market predicts June 12, 2024. There’s a 36% chance of a target of 5 to 5.25% (the most prevelant odds of any rate). That’s down 0.25% from the current number.

Fast forward to Nov. 7, 2024, about one year from now, and there’s a 13.5% chance rates will be at least 1% lower than they are now and a 67.8% chance they’ll be at least a half-point lower.

Have we reached peak interest rates for this cycle? Maybe. Is the Fed poised to cut rates aggressively anytime soon? Probably not.

But there’s only a 5.1% chance that rates will be at least as high as they are now at the conclusion of the Fed’s final 2024 meeting (Dec. 18, 2024).

What does that tell us?

If you’re wanting to lock into CDs at good rates or take advantage of savings accounts, now is the time. And if you’re waiting to borrow money at more favorable terms, you should get at least marginally better rates by the end of next year.