What The "Emergency" Fed Interest Rate Drop Means To You

Yesterday the Federal Reserve announced an unexpected "emergency" rate cut of half a percent due to growing concerns about the economic impact of the coronavirus. That is the largest reduction since 2008, the height of the financial crisis. But just because the Fed took advantage of its ability to make an emergency adjustment outside of its scheduled meetings doesn't mean we've entered national financial panic mode. It does, however, indicate that we're acknowledging the arrival of an unpredictable economic period. You should take the opportunity to shore up your finances and take advantage of "cheaper" debt. If you've been thinking of buying a home or refinancing, it could be time to move forward. If you're shopping around in the next few weeks, you'll start to see notably lower rates. The same goes for credit cards. If you have a card with a variable interest rate, you may see that go down. If you're in debt, it's a great time to try to pay off as much of it as you can. This rate cut means it's very likely that your high-yield savings account is going to reduce its annual percentage yield (APY). But that's no reason to empty out your savings account. Even an interest rate of 1% is far more than you'll earn in a regular savings or checking account. If you want your money to go further during this period, you can consider contributing less to your savings and instead using that money to pay down your debt more quickly. Or, you can lock in an interest rate with a CD. And remember your investments, including your 401K retirement account are for the long term. Play it safe and hang on to your assets, you're in a good position to regain those losses from last week well before it's actually time to sell or withdraw.

SOURCE: Two Cents

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