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Susan Tompor: How saver's can make the best of falling interest rates

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

No one has been getting rich stuffing their money into a savings account, and it's bound to get even tougher, as the Federal Reserve shifts further into a rate-cutting mode.

The Federal Reserve announced another rate cut after its two-day policy meeting last week. A divided Fed lowered its benchmark interest rate by another quarter percentage point to a range of 1.75% to 2% in an effort to stave off a possible recession triggered by a global economic slowdown and the U.S. trade war with China.

But don't expect the Fed to respond to President Donald Trump's tweeted suggestion that the "Fed should get our interest rates down to zero, or less."

Not going to happen if the economy doesn't tank. Yet further rate cuts could be ahead.

"Global economic indicators are looking cooler, and I believe that the Fed will continue with its 'risk management' approach through next year," said Robert A. Dye, chief economist at Comerica Bank.

Dye's forecast includes another 25 basis-point cut after the Fed two-day policy meeting Dec. 10-11 and another quarter-point cut in June 2020.

 

After four rate cuts, short-term rates could be down to a range of 1.25% to 1.5% -- down a full percentage point from earlier in 2019.

No one has a precise crystal ball for the timing -- or the actual rate cuts for that matter -- given that the Fed will be heavily influenced by the overall health of the U.S. economy, as well as any slowdown overseas.

For consumers, the Fed's next rate cut would mean a slight break on the cost of borrowing on credit cards and other loans.

But savers are going to be making even less interest on money they're keeping at the bank.

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