240-428-1622 | info@shermanwealth.com

What The Shift In The Federal Reserve Language Means For You

Coaching Students at the MCPS Business Pitch Challenge
April 15, 2019
LACK OF FINANCIAL LITERACY IN AMERICA’S SCHOOLS
May 9, 2019
Show all

What The Shift In The Federal Reserve Language Means For You

Yesterday, the Federal Reserve held its benchmark rate at 2.5%.  It only took one word from Fed Chair Jerome Powell on inflation to send the markets reeling, and that word was “transitory.” According to this CNBC article “Traders have been speculating that recent weaker inflation readings would concern the Federal Reserve so much that it would cut interest rates later this year. Powell knocked that idea, by explaining that the central bank still sees the weakness as the result of “transitory” factors, such as portfolio management services, lower apparel prices and airfares.  The Fed’s target on inflation is 2%, and the core PCE rate watched by the Fed fell to a surprising 1.6% in the first quarter.”   President Donald Trump, who earlier this week urged the Fed to cut the rate by 1 percentage point was most likely frustrated with the Fed chair as well.

Since the Fed did not indicate which direction the next move may be, this is a good time to review any variable interest rates you have (student loans, etc.). Use this opportunity to pay down these types of
debts and boost your savings cushions. And, for those of you who might be getting tax refunds,
you may want to think about using that money to add to your savings or pay down debt.
As your April 30 bank statements come in, this is an opportune time to re-evaluate your
checking and savings accounts. If you aren’t earning at least 2% for your short-term goals, you
should be looking into some new options.

With some mortgage rates are at a low of 3.125%, there are hopes that this will continue to
stimulate the housing market. It’s also a good time to look at your current mortgage rate. If
you have an ARM that’s expiring (adjustable rate mortgage), now is good time to consider
whether it might be worth converting that to a fixed rate mortgage. Now is the time to take advantage of lower long term rates that may not be here forever.

We feel that Greg McBride at BankRate sums it up best in this tweet.

 

Greg McBride, CFA (@BankrateGreg)
For consumers, the reprieve from rising rates will continue. Now is time to focus on paying down high cost debt & boosting savings cushion so you’re better off when the economy does soften.

We’ve started a Daily Read’s section to include relevant and interesting articles that pertain to
finance, lifestyle and local news. Check that page to sign up to get it emailed daily or you can follow along on our social media accounts. Please let us know what you may want to learn more about.