While many of us may have hoped for interest rate cuts by now, the Federal Reserve held rates steady this month and even reduced the number of projected interest rate cuts this year to just one.
Even though inflation seems to be cooling a little with a better-than-expected Consumer Price Index report, it's still too high for the Fed. Lowering rates too soon could reignite inflation and send prices even higher.Â
While Fed Chair Jerome Powell's remarks this month were more optimistic, he made it clear that the central bank will not cut interest rates until it has more proof that inflation is moving sustainably to 2% annually, the Fed's target rate.Â
"So far this year, the data have not given us that greater confidence," Powell said at the June 12 press conference following the Federal Open Market Committee meeting. "The most recent inflation readings have been more favorable than earlier in the year, however, and there has been modest further progress toward our inflation objective."
Read more: Worried About Inflation? 93% of Americans Are, Too, CNET Survey Finds
When will the Fed lower rates?
Despite progress, the question remains: When will the Fed cut rates?Â
Last week, some experts predicted that the Fed would cut rates as early as July, citing cooling inflation and a softening job market. After this month's meeting and CPI report, experts are weighing in again on when the Fed will start cutting rates, and how many we can expect this year. However, there's no consensus.
Three of our trusted experts shared their predictions on when the Fed will lower rates. As we learn more, we'll keep you updated on whether predictions change and what it means for you.Â
One rate cut, but not until the end of the year
Core inflation, which excludes food and energy, is at the slowest pace in over three years, said Sid Vaidya, US chief investment strategist and senior vice president at TD Wealth. And excluding housing, inflation for the services category is flat.
He predicts one interest rate cut in December and more cuts next year, leaving the Fed funds rate closer to 3.5% by the end of 2025.
A rate cut could come as early as SeptemberÂ
Daniella Flores, founder of I Like to Dabble and CNET Money expert review board member, believes there's a chance the Fed could cut rates sooner than expected.Â
That could change if the job market takes a turn for the worse. In the Fed's remarks, Powell said the central bank is prepared to respond if the labor market weakens unexpectedly.Â
Later this year, at bestÂ
Jason Walter, a real estate expert and CNET Money expert review board member, pointed out that late last year, markets forecasted rate cuts starting as early as this spring. But since then, inflation has remained stubbornly high, forcing the Fed to revise its December projection of three cuts down to one. But since the CPI report came in below expectations, there's still a chance for interest rate cuts, he said.Â
Read more: Worried About Inflation? 93% of Americans Are, Too, CNET Survey Finds
What the Fed's decision means for your money for now
If the Fed lowers rates, the economy won't change overnight. But over time, you may see the cost of borrowing slowly improve.Â
For now, interest rates for loans and credit cards will remain high. Walter pointed out that mortgage rates will remain elevated, and US home sales will continue to be subdued. If you're planning to buy a car or home anytime soon, compare lenders for the best rates and calculate whether your monthly payments can fit into your budget.Â
And remember that the latest inflation numbers suggest that the growth of prices may have slowed, but that's not the same as prices coming down. Expect them to remain elevated this year.
Flores recommends lowering costs by taking advantage of sales, rewards programs and coupons to make everyday essentials more affordable.
If the Fed does decide to make a rate cut, a single cut won't lower prices overnight. The Fed could make one rate cut and then hold rates for a few meetings to monitor the results and avoid moving too hastily.
