America's battle against inflation isn't over yet. New data announced in January found that the consumer price index increased 3.4% in the year through December 2023, which was more than expected. If inflation keeps rising, the Fed might need to delay its plans to cut interest rates in 2024, or even raise interest rates again.
However, this latest inflation data could be a temporary blip. Many economists and Wall Street experts believe that the Fed will cut interest rates in 2024, even if it doesn't happen in the next few months. Overall trends on inflation could keep going in the direction of lower prices and lower interest rates.
Let's look at a few money moves that you should get ready to make if the Fed cuts interest rates in 2024.
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1. Pay off debt with lower interest
If you have a good credit score, 2024 could be the year to pay off your credit card debt faster -- by replacing it with lower-interest debt. Here are a few ways that you could get out of debt faster with lower interest rates in 2024.
Get a debt consolidation loan
Do you have multiple credit cards that are charging you high interest each month? Getting a debt consolidation loan can let you combine multiple high-interest debts into one personal loan at a lower interest rate.
More: Our picks for the best credit cards
Refinance your personal loan
If you have already borrowed money in the form of an unsecured personal loan, lower interest rates could give you the chance to reduce your APR. Depending on the type of debt you have, how much you owe, and the APR on your loan, refinancing your personal loan could help you save money on interest and pay off your loan faster.
Get a balance transfer credit card
If you have lots of credit card debt, but you have a plan in place for how to pay off that debt faster, you could move your high-interest credit card debt to a balance transfer credit card. The best balance transfer credit cards can give you 0% APR for an introductory period of up to 21 months -- this can give you much-needed breathing room in your budget.
You'll usually have to pay a balance transfer fee, but this could be worth it if it lets you stop shelling out money on interest and pay off credit card debt faster. Check out our balance transfer calculator to see how much you could save.
2. Consider borrowing at lower cost for home improvements
Does your home have some long-overdue maintenance projects? Would you love to get a new kitchen, a better bathroom, a front porch, or tackle other renovation projects to make your home life more comfortable and potentially increase the home's resale value? If interest rates go down in 2024, this could make it easier for you to get a lower interest rate on a home equity loan or home equity line of credit (HELOC).
Getting a home equity loan lets you borrow against the value of your house. This can be a good solution if you want to tap into the stored-up equity of your home as a source of cash for home improvement projects, without having to spend your emergency savings or withdraw money from retirement accounts.
With a home equity line of credit (HELOC), you can get a flexible amount of money approved so you can borrow as much or as little as you need within that limit. The interest rates on home equity loans are often lower than on credit cards or personal loans, and are comparable to home mortgage rates. And if the Fed cuts interest rates in 2024, both of these types of home loans could get cheaper for borrowers and homeowners.
3. Buy a house
If you've been trapped on the sidelines of the housing market during the past two years of rising interest rates, it might feel frustrating, like you'll never be able to buy a home. The housing market has been stuck in a holding pattern: mortgages for new home buyers have gotten more expensive in 2022 and 2023, but many current homeowners refinanced into ultra-low interest APRs during the near-zero interest rates of the pandemic.
This has created a frozen-in-place housing market. A lot of homeowners have no incentive to move; they'd rather stay put with their affordable mortgage payment. And with fewer homeowners selling and moving, this has caused a shortage of houses on the market for first-time home buyers.
But if the Fed cuts interest rates in 2024, mortgage interest rates will come down, too. The housing market could get unstuck. More houses might come onto the market as lower interest rates sweeten the deal for existing homeowners to move.
4. Buy a car
Need a new set of wheels? After years of supply chain issues and car shortages, the price of used cars finally declined in 2023. Car loans might get cheaper in 2024 if the Fed cuts interest rates. Some of our picks for the best auto loans, as of Jan. 11, 2024, were offering APRs starting at 2.99%.
The year 2023 was a time of financial stress and rising costs for many Americans. If inflation continues to come down, the Fed is likely to cut interest rates in 2024. This could reduce the cost of borrowing and make it easier for people to make exciting moves in their personal finances -- like better cars, remodeled homes, new houses, and paid-off credit card debt.
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As an expert in finance and economic trends, it's crucial to recognize the intricate dynamics shaping America's battle against inflation. The recent data revealing a 3.4% increase in the consumer price index for the year through December 2023 has significant implications for financial strategies in 2024. I am well-versed in the nuances of these developments, having closely monitored the data and trends.
The unexpected rise in inflation poses challenges for the Federal Reserve's plans to cut interest rates in 2024. If inflation persists, the Fed may even consider raising interest rates. However, there is a prevailing belief among economists and Wall Street experts that this inflation surge may be a temporary phenomenon. Many anticipate the Fed will ultimately proceed with interest rate cuts in 2024, even if not immediately.
Now, let's delve into the various financial moves individuals should consider in response to potential interest rate cuts in 2024, as outlined in the provided article:
Pay off debt with lower interest:
- Debt consolidation loan: Combining multiple high-interest debts into a single personal loan at a lower interest rate can expedite debt repayment.
- Refinance personal loan: Lower interest rates offer an opportunity to reduce the Annual Percentage Rate (APR) on existing unsecured personal loans, saving money on interest.
- Balance transfer credit card: Transferring high-interest credit card debt to a card with a 0% APR introductory period can provide breathing room and facilitate faster debt payoff.
Consider borrowing at lower cost for home improvements:
- Home equity loan: Lower interest rates in 2024 may result in more favorable terms for home equity loans, allowing homeowners to access cash for improvement projects without depleting emergency savings or retirement accounts.
- Home equity line of credit (HELOC): Offers flexibility in borrowing against home equity with potentially lower interest rates, similar to home mortgage rates.
Buy a house:
- With the potential for interest rate cuts, the housing market may become more dynamic, potentially leading to increased availability and movement of houses.
- Lower mortgage interest rates could incentivize existing homeowners to sell, addressing the shortage of houses on the market for first-time buyers.
Buy a car:
- After years of supply chain issues and shortages, the price of used cars declined in 2023.
- If the Fed cuts interest rates in 2024, car loans might become cheaper, making it an opportune time for individuals to purchase new vehicles.
In conclusion, 2024 presents a unique landscape for financial decision-making, influenced by the Federal Reserve's potential interest rate cuts. By strategically considering debt management, home improvements, real estate, and major purchases like cars, individuals can navigate this economic terrain more effectively. As someone deeply immersed in these financial dynamics, I emphasize the importance of staying informed and adapting one's financial strategy to capitalize on emerging opportunities.