Interest rates have a significant influence on household finances. When rates increase, borrowers suffer and savers benefit. The Fed then began raising rates in recent years, only to turn around and cut rates twice in 2019 out of fears of a global recession. These fears persist, leading one to expect a flat or downward trend for future interest rates. This means it may be a good time to buy a house or car, or to refinance an existing mortgage. Declining rates also benefit those who own bond mutual funds, but hurt the returns on CDs and savings accounts.
Key Takeaways:
- It’s important to understand interest rates and what they mean to your personal and household finances.
- In general, savers benefit when interest rates go up because their money grows.
- Because the Fed has kept interest rates relatively low for the past ten years, people were motivated to borrow money to purchase cars and homes.
“Others explain this inverted yield curve may be different this time, and not necessarily a harbinger of an imminent recession.”
