The Federal Open Market Committee (FOMC) decided to leave the fed funds rate unchanged at 4.25%–4.50% at its June meeting. Fed Chair Jerome Powell reiterated in his recent statement before Congress that the FOMC was “well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”
Powell noted that lower-than-expected inflation or a weaker labor market would push the FOMC “in a direction of being able to cut sooner.” However, “if the labor market remains strong and we do see higher inflation,” the FOMC “would still get around to cutting, but it would be later.”
Goldman Sachs Research has pulled forward their forecast for the next rate cut to September (from December previously) followed by two more cuts in October and December. Our economists see early evidence that suggests the tariff effects on inflation may be smaller than expected, while other disinflationary forces have been stronger. Furthermore, the team expects tariffs will only have a one-time price level effect. There is, however, increasing risk of a softening labor market to consider.
While the Fed continues its “wait and see” approach on interest rates, there are steps you can take to help ensure you’re financially well-positioned in case interest rates stay elevated for an extended period of time.
Here are five tips to consider when it comes to your money.
When you feel uncertain about your future cash flow, it makes sense to review your debt obligations and pay down those with high interest rates. The faster you’re able to pay off your debt, the sooner you can redirect your cash toward your saving or investing goals instead.
High-interest debt is generally considered to be any loans that charge interest rates of 8% or more.
The average annual percentage rate (APR) for credit cards was 21.58% in 2024, according to the Fed. Interest typically compounds daily, which can add up fast when you leave balances unpaid over time.
The US Securities and Exchange Commission (SEC) recommends that you track how much you owe and determine how much you need to pay each month, starting with credit cards that charge the highest interest rate. Pay as much as you can toward that debt until your balance is zero, while keeping up with the minimum payments on your other cards.
Striking a balance between paying off your debt or investing the dollars instead can be challenging.
If you’re wondering if you’re missing potential investment opportunities by paying down debt, keep in mind that “[v]irtually no investment will give you returns to match an 18% interest rate on your credit card,” according to the SEC.
A general rule of thumb is that if the interest rate on your debt is higher than 6%, it can be smart to pay off those higher-interest debt first. On the other hand, if the interest rate is lower than 6%, investing the money may make more sense.
Each individual’s financial situation and risk tolerance are unique, so it’s a good idea to check in with a financial advisor for personalized recommendations.
Whenever the fed funds rate drops, bank interest rates will typically follow suit. Parking your cash in high-yield savings accounts can help your money earn money while banks are still offering competitive rates.
For added peace of mind, consider opening a certificate of deposit (CD) account to lock in your interest rate over the term of your CD. Many fixed-rate CDs can offer rates that are higher than the inflation rate.
If you need flexibility in accessing your cash in an emergency or if you’re planning a big purchase but unsure when it will happen, consider no-penalty CDs. They offer flexibility to withdraw money before the maturity date without penalty. Interest rates on no-penalty CDs are also often more competitive than traditional savings accounts.
Depending on the bank, you can typically withdraw the money beginning six or seven days after a no-penalty CD is funded.
In an uncertain economy, putting your hard-earned dollars into your retirement plan can give you an edge in securing your future. If you’re still decades from retirement and have extra cash, now could be a good time to take advantage of making pre-tax contributions to your 401(k) plan.
If you’re closer to retirement, consider making “catch-up contributions” to boost your retirement savings. The IRS provides a higher annual contribution limit for individuals age 50 and older. You can visit the IRS website for more information about catch-up contribution limits.
Having a good credit score not only helps with your eligibility for loans, but it could also open more options to borrow at lower interest rates. While you can still secure loans with lower credit scores, the terms tend to be less favorable.
By raising your credit score from fair (580 to 669) to very good (740 to 799), you could potentially save over $39,000 over the lifetime of your balances. Raising credit score may also help negotiate lower monthly debt payments by 5.5%, according to a recent study from LendingTree, an online loan marketplace provider.
If your credit score isn’t where you’d like it to be, here are a few ways that can help improve your score according to FICO, the company behind the widely used credit scoring model:
It goes without saying that during economic uncertainty, large purchases like a home or a car may be on the backburner until more certain times. If you do decide to hold off on making major purchases, consider shifting your focus and resources to paying down debt and boosting your savings—like padding your emergency fund to prepare for any unexpected event.
It can be challenging to plan for what you don’t know, but you can take control of what you do know, such as your current income and debt obligations. Making smart money moves can help secure your path toward achieving your financial goals – whatever they may be.
Deposits products are provided by Goldman Sachs Bank USA, Salt Lake City Branch. Member FDIC.
This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. This article is not a product of Goldman Sachs Global Investment Research. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed. You are not permitted to publish, transmit, or otherwise reproduce this information, in whole or in part, in any format without the express written consent of Goldman Sachs. This foregoing restriction includes, without limitation, using, extracting, downloading or retrieving this information, in whole or in part, to train or finetune a machine learning or artificial intelligence system.
Join our Marcus social media community, where we share content and inspiration to help improve your financial health. See you there!
5 min read
