The Fed is DONE hiking interest rates but will only start to cut them mid-2024, economists claim – here’s what it means for YOU

Americans will not get a reprieve from rising interest rates until at least the middle of next year, according to a new poll of a hundred economists.

The Federal Reserve decided this month to hold benchmark fund rates steady at their current 22-year high of between 5.25 and 5.5 percent.

Officials will meet again before the end of the year, on December 12 and 13, where they will decide whether to raise rates again.

But a new Reuters poll shows that 87 out of 100 economists believe rates will not rise again and that the Fed’s most aggressive tightening cycle in four decades has ended.

About 86 percent said they could not predict rates would fall in the first quarter of next year, but 58 percent agreed they would start falling by mid-2024.

The view contradicted comments from Fed Chairman Jerome Powell today, who indicated the body was not “confident” it had won the war on inflation.

Powell reiterated that the Fed was committed to reducing annual inflation – currently at 3.7 percent – to 2 percent.

In his speech to the International Monetary Fund in Washington DC, he said: ‘The Federal Open Market Committee is committed to achieving a monetary policy that is sufficiently restrictive to reduce inflation to 2 percent over time; we are not confident that we have reached such a position.”

The Fed’s relentless campaign to raise rates has pushed borrowing costs from an all-time low of 0.5 percent in April 2020 to 5.5 percent today.

In theory, higher interest rates should encourage consumers to spend less and therefore slow price increases.

But economists have been surprised by the resilience of consumer spending in the face of higher living costs. This trend is believed to be driven by a red-hot labor market, which added 336,000 jobs in September, keeping the unemployment rate at 3.8 percent.

Fed officials have consistently said rates need to stay higher for longer to ease price pressures.

One thing that could justify an earlier rate cut is a severe economic downturn. But that looks unlikely once the world’s largest economy posted nearly 5% annualized growth last quarter.

Still, gross domestic product (GDP) growth was expected to slow to an annualized pace of 1.1 percent this quarter and average just 1.1 percent in 2024.

One of the biggest casualties is mortgage interest rates, which are currently at a multi-decade high of 7.79 percent, according to the latest data from government-backed lender Freddie Mac.

The interest rate offered on 30-year fixed-rate mortgages is not directly affected by the Fed’s benchmark rate, but it does track the yield on 10-year Treasury bonds.

The bonds are affected by several factors, including forecasts around inflation, Fed actions and investor reactions as a result.

Other home loans, such as adjustable-rate mortgages (ARMs) – which are gaining popularity – are more closely tied to the Fed’s moves.

Meanwhile, the average interest rate on a credit card is 20.72 percent, according to figures from Bankrate.

Credit cards are one of the few lending instruments that offer variable interest rates, meaning they change in line with the Fed’s benchmark figure.

Meanwhile, the cost of car loans has also skyrocketed. The average rate for new car loans in September was 7.4 percent, data from Edmunds.com shows.

But in better news, higher interest rates should ideally give rise to better interest rate deals on savings accounts – although this is not always consistent.

According to Bankrate, the average return for a savings account is 0.59 percent APY.

However, a handful of banks offer interest rates closer to the Fed’s 5 percent. For example, Goldman Sachs’ Marcus offers 4.15 percent APY – as does tech giant Apple on its Apple Card Saving account. The Apple account is also a joint partnership with Goldman Sachs.