- - Page 2 of 7 The Finance Gourmet

When Will My Savings Interest Rates Go Up?

March 18, 2022 by Finance Gourmet

Waiting for your bank or credit union to raise the interest rate they pay you on your savings or money market accounts? Don’t hold your breath. Better Savings Interest Rates While the Fed kept interest rates at zero, most banks followed suit with their basic interest-bearing accounts, getting as close as their computer software allowed, 0.01% interest or APY if you prefer. A quick search of big bank websites shows mostly the same. Sure, you can grab a little bit more interest on a little bit more money if you meet certain terms and conditions, but the basic savings accounts all look like this. Bank Interest Rate Chase Savings Interest Rate 0.01% US Bank Standard Savings Interest Rate 0.01% FirstBank Regular Savings Interest Rate 0.01% Bank of America Advantage Savings Interest Rate 0.01% USAA Savings Account Interest Rate 0.01% Wells Fargo Way2Save Interest Rate 0.01% According to company’s website as of 3/18/22 You get the idea. Most of these banks have a way to earn more interest if you perform certain steps like setting up direct deposit or keeping a minimum balance, but even then, the rates are nothing to write home about. The best high-yield savings accounts online do …

How Do Rising Interest Rates Affect Credit Cards?

March 17, 2022 by Finance Gourmet

How Does The Federal Reserve Raising Rates Affect My Credit Cards? You heard that the Federal Reserve raised interest rates. How does the Fed increasing interest rates affect your credit cards personally? It’s actually pretty easy to tell. First off, your credit cards are most likely tied to something called the prime rate, not the federal funds rate. The rate the Federal reserve raises is the rate the Fed charges banks for overnight loans. The prime rate is the interest rate that banks charge their most valuable (wealthy) customers. The prime rate moves in step with the Fed Funds rate. Before the Fed raised rates, the fed fund rate was 0% (technically 0% – 0.25%), now it is 0.25% (technically 0.25% to 0.50%). The prime rate was 3.25% and now it is 3.50%. How do rising interest rates affect your credit cards? Simple. Your credit card interest rate is the prime rate plus another amount. The other amount is made up by the credit card issuer and you agreed to it when you signed the credit card application. Finding out how much your interest rate is, is easy. Just check your statement or log on to your credit card’s website. …

Fed Day 2022 – Fun and Rates

March 16, 2022 by Finance Gourmet

It’s Fed Day, boys and girls, and the markets are feeling pretty good this morning, having already priced in negativity from Russia’s invasion of Ukraine. Markets are up, although they trimmed the earlier pop. All eyes are on the Federal Reserve Board meeting where the Fed is expected to raise interest rates. Usually, rising interest rates mean putting the brakes on business and stocks, so why is the market happy? Inflation is higher than anyone would like, and the biggest, baddest, bluntest, tool in the inflation fighting basket is higher interest rates. In other words, everyone wants higher rates in order to fix inflation, and everyone is expecting the Fed to give them what they want. So, the markets are up. What’s the catch? Well, higher rates really do slow down the economy, and while inflation has surged as of late, remember it’s coming off of years of very low inflation and a pandemic. It may be that the inflation we see is a temporary surge. While it cannot be ignored, it can be overreacted to, and this is where things get tricky. Raise interest rates too high, too fast, and crash the economy. Raise rates too slowly and let …

Blaming the Fed

January 27, 2022 by Finance Gourmet

Selective amnesia and analysts dying to be “right” is contributing to a flood of inaccurate articles seeking to blame the Fed. I saw this in my Twitter feed this morning and I just couldn’t let it go by. It’s filled with the kind of half-truths and misinformation that builds an analyst’s career, unfortunately, but that doesn’t make it true. Here we go. According to this tweet, The Fed spent 12 years creating an “everything bubble,” a term so bizarre that it requires quotes. Oh, and the Fed didn’t spend 12 years creating this so-called everything bubble. Oh, and before we start pointing fingers, until THIS YEAR neither this analyst, nor almost any other was asking for the Fed to tighten monetary policy because the economy was teetering on a cliff and every bit of the stimulus was required to prevent the Great Recession II, or worse. Yep. For exactly, ONE MONTH, inflation has been a bit crazy. Too bad the graph they posted as “evidence” is so far zoomed out that you can’t see what really happened. Maybe they couldn’t find one that showed more recent events. Oh, wait! Here’s one. The crazy, reckless Fed that has been pumping up …

Will Fed Raise Rates Sooner Than Expected?

October 6, 2021 by Finance Gourmet

There are several economists out there predicting that rising inflation will push the Federal Reserve to raise interest rates sooner than project. In fact, half of the Fed Board was talking about a rate increase in 2022 instead of the previously telegraphed 2024. But, does that mean The Fed will raise rates sooner than previously stated? Inflation Isn’t Coming All of this is predicated on inflation rising. The concern right now is that prices have been rising this year. This is all true, but this is October and that means the holiday shopping season is upon us, and chances are it won’t look very good come January. We’ve already seen the job reports showing that job growth is slowing despite a supposed worker shortage. Unemployed people spend a lot less at Christmas. But, there is more than that. Employed people who know unemployed people spend less as well due to a fear that they could soon be unemployed as well. Add to that reports that there are going to be supply chain problems, and that container ships have to wait excessive times to get their cargo unloaded by dock workers on the west coast and you end up with a …

Federal Reserve Meeting Notes Meaning

August 18, 2021 by Finance Gourmet

The Federal Reserve meets once a quarter. After that meeting, they announce what, if any changes, they have made to the Fed’s interest rate policy. At the last meeting, there were no changes to the Federal Reserve’s interest rate targets. The Federal Reserve meeting notes refine the details of the main Fed announcement. Fed’s Meeting Notes Later, after they have been reviewed and made viewable for the public, the Fed releases the notes from it’s meeting. Financial analysts and market pundits then parse these notes for clues to the Fed’s thinking. This time, everyone is looking toward how the notes take about bond-buying tapering. What does this mean? The short version is that when the economy went so bad back during the Great Recession following the real estate market crash, the Fed had to do more than just cut interest rates to stabilize the economy. In my opinion, the Fed Chairman Ben Bernake saved the US economy from a hard recession by flooding the market with liquidity and saying that he would keep doing it for as long as it takes. Check out my Acorns review is Acorns Legit? Basically, as long as it takes, has never really come. One …

Fed Stays Steady

June 22, 2021 by Finance Gourmet

The Federal Reserve left interest rates unchanged, BUT they are beginning to taper off their bond buying program which will soak up some of the cheap money floating around out there and gently tighten the money supply. This is a smart move that helps reduce inflationary pressures while at the same time avoiding strangling the recovery growing out of the pandemic recession.

Fed Says 0% Interest For Years

September 16, 2020 by Finance Gourmet

According to news reports, the Federal Reserve will signal that its interest rate plan will remain unchanged through the end of 2023. These kinds of “leaks” are typically from Fed staffers trying to lessen any shock ahead of the actual Fed meeting. What 0% Interest For Three Years Means For starters, this is both a bold, and a baloney statement. It’s bold in that stating there will be no interest rate hikes for three years, the Fed is making a prediction about the U.S. economy and where it will be going and committing to 0%. It’s baloney, because if things go well coming out of the whole Corona virus thing and the U.S. economy roars ahead in 2021, or 2022, the Fed will just come out with a new statement saying that economic data dictate a new policy direction. So, what is the point of the Fed’s statement? Investors know how to make money. It isn’t about predicting the future, it’s about determining what the risk is and pricing it accordingly against the possible return. This is a lot easier than it sounds. It requires looking at an impossible number of variables, and weighing each one. In the end, the …

Negative Interest Rates and The Fed

June 15, 2020 by Finance Gourmet

Like any type of news, sensational, click-bait news draws in a lot of clicks for financial websites. Unfortunately, this can lead to a lot of confusion, especially for folks who only read the headlines. I can often tell when this happens because my questions fill up with vaguely understood concepts and concerns about unlikely situations and issues. This is happening more and more with the topic of negative interest rates. Negative Interest Rates What are negative interest rates? Let’s start with what are negative rates. The concept is simple on its face. Interest rates are normally, “positive.” The borrower pays a (positive) interest rate on a loan to the lender. Or, in the case of a savings account, the bank pays a (positive) interest rate to the account holder. In a world of negative interest rates, this would theoretically reverse. The lender would pay the borrower to take out a loan, and the account holder would pay the bank to keep their money. If this sounds bizarre, you are right, and it wouldn’t really happen. — We’ll get to that in a moment. More abstractly, The Federal Reserve Bank pays banks a small amount of interest to hold deposited funds …

Neutral Interest Rates

January 14, 2019November 28, 2018 by Finance Gourmet

Fed Chairman Jerome Powell made some very interesting remarks where he said he thought that interest rates were “just below” neutral. This is bizarre on many levels. First and foremost, neutral interest rates are perfect interest rates unless your economy is in a recession in which case you want stimulating interest rates, or if you are trying to control inflation in which case you want interest rates that have a constricting effect on the economy to stop price increases. So, if interest rates were close to neutral, and inflation was not increasing, then wouldn’t you want to keep interest rates at neutral? Check out my notes about Ebates and holiday shopping. But, Powell and the rest of the Fed have been telegraphing a December rate increase as loudly as possible. In other words, event though interest rates are “just below” neutral, Powell and company want to raise them. Why? Economy is Teetering The other weird bit is that everyone can see the economy is slowing down, and quickly. Housing starts are way down. Housing sales are decreasing. Both are very much affected by higher rates. The stock market is falling, having erased the whole year’s gains. Also, in very large …