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One interest rate cut in 2024 'looks quite reasonable,' strategist says

The Federal Reserve announced Wednesday it will leave interest rates unchanged as inflation continues to prove stickier than expected.

However, the move also dashes hopes that the Fed will be able to start cutting rates soon and relieve consumers from sky-high borrowing costs.

The market is now pricing in one rate cut later in the year, according to the CME’s FedWatch measure of futures market pricing. It started 2024 expecting at least six reductions, which was “completely fantasy land,” said Greg McBride, chief financial analyst at Bankrate.com.

That change in rate cut expectations leaves many households in a bind, he said. “Certainly from a budgetary standpoint, not only is inflation still high but that is on top of the cumulative increase in prices over the last three years.”

“Prioritizing debt repayment, especially of high-cost credit card debt, remains paramount as interest rates promise to remain high for some time,” McBride said.

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Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to its highest level in more than 22 years.

The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

The spike in interest rates caused most consumer borrowing costs to skyrocket, putting many households under pressure.

Increasing inflation has also been bad news for wage growth, as real average hourly earnings rose just 0.6% over the past year, according to the Labor Department’s Bureau of Labor Statistics.

Even with possible rate cuts on the horizon, consumers won’t see their borrowing costs come down significantly, according to Columbia Business School economics professor Brett House.

“Once the Fed does cut rates, that could cascade through reductions in other rates but there is nothing that necessarily guarantees that,” he said.

From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at where those rates could go in the second half of 2024.

Credit cards

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. In the wake of the rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.

Annual percentage rates will start to come down when the Fed cuts rates, but even then they will only ease off extremely high levels. With only a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Matt Schulz, chief credit analyst at LendingTree.

“If Americans want lower interest rates, they’re going to have to do it themselves,” he said. Try calling your card issuer to ask for a lower rate, consolidating and paying off high-interest credit cards with a lower-interest personal loan or switching to an interest-free balance transfer credit card, Schulz advised.

Mortgage rates

Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.

The average rate for a 30-year, fixed-rate mortgage is just above 7.3%, up from 4.4% when the Fed started raising rates in March 2022 and 3.27% at the end of 2021, according to Bankrate.

“Going forward, mortgage rates will likely continue to fluctuate and it’s impossible to say for certain where they’ll end up,” noted Jacob Channel, senior economist at LendingTree. “That said, there’s a good chance that we’re going to need to get used to rates above 7% again, at least until we start getting better economic news.”

Auto loans

Even though auto loans are fixed, payments are getting bigger because car prices have been rising along with the interest rates on new loans, resulting in less affordable monthly payments. 

The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, competition between lenders and more incentives in the market have started to take some of the edge off the cost of buying a car lately, said Ivan Drury, Edmunds’ director of insights.

“Any reduction in rates will be especially welcome as there is an increasingly higher share of consumers with older trade-ins that have sat out the market madness waiting for an automotive landscape that looks more like the last time they bought a vehicle six or seven years ago,” Drury said.

Student loans

Federal student loan rates are also fixed, so most borrowers aren’t immediately affected. But undergraduate students who took out direct federal student loans for the 2023-24 academic year are now paying 5.50%, up from 4.99% in 2022-23 — and any loans disbursed after July 1 will likely be even higher. Interest rates for the upcoming school year will be based on an auction of 10-Year Treasury notes later this month.

Private student loans tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means those borrowers are already paying more in interest. How much more, however, varies with the benchmark.

For those struggling with existing debt, there are ways federal borrowers can reduce their burden, including income-based plans with $0 monthly payments and economic hardship and unemployment deferments

Private loan borrowers have fewer options for relief — although some could consider refinancing once rates start to come down, and those with better credit may already qualify for a lower rate.

Savings rates

While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

As a result, top-yielding online savings account rates have made significant moves and are now paying more than 5.5% — above the rate of inflation, which is a rare win for anyone building up a cash cushion, McBride said.

“The mantra of ‘higher for longer’ interest rates is music to the ears of savers who will continue to enjoy inflation-beating returns on safe-haven savings accounts, money markets and CDs for the foreseeable future,” he said.

Currently, top-yielding certificates of deposit pay over 5.5%, as good as or better than a high-yield savings account.

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Social Security Fairness Act benefit increases to arrive this spring

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Skynesher | E+ | Getty Images

Lump sum payments to begin arriving in February

In a new update released on Tuesday, the SSA said it will begin issuing retroactive payments in February. Most people will receive the one-time payment by the end of March, according to the agency.

The SSA plans to process the increase to monthly benefits starting in April.

The new timeline “supports President Trump’s priority to implement the Social Security Fairness Act as quickly as possible,” Social Security acting commissioner Lee Dudek said in a statement.

“The agency’s original estimate of taking a year or more now will only apply to complex cases that cannot be processed by automation,” Dudek said. “The American people deserve to get their due benefits as quickly as possible.”

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Among those affected include some teachers, firefighters and police officers in certain states; federal employees who are covered by the Civil Service Retirement System and people who worked under foreign social security systems, according to the Social Security Administration.

What affected beneficiaries should know

Retroactive payments, which most people should receive by the end of March, will be deposited directly into bank accounts on file with the Social Security Administration.

All affected beneficiaries should receive a notice by mail from the Social Security Administration with details about their retroactive payment and new benefit amount. Those notices should come two to three weeks after the retroactive payments, according to the agency.

If your direct deposit information or current mailing address are up to date with the agency, no action is needed, according to the agency. If you want to double check the information the agency has on file, you may sign into your personal online account or call the agency.

If you want to ask about the status of your retroactive payment, the Social Security Administration urges you to hold off until April.

Beneficiaries should also wait until after they have received their April monthly check before contacting the agency to ask about their new benefit amount.

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The average IRS tax refund is 32.4% lower this season. Here’s why

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The average tax refund is 10.4% lower than last year according to the latest Internal Revenue Service data, and inflation is taking more of those dollars.

Bill Oxford | E+ | Getty Images

The average tax refund this year is down 32.4% compared to last year, according to early filing data from the IRS. 

Tax season opened on Jan. 27, and the average refund amount was $2,169 as of Feb. 14, down from $3,207 about one year prior, the IRS reported on Friday. That figure reflects current-year refunds only.

However, the Feb. 14 filing data doesn’t include refunds receiving the earned income tax credit or additional child tax credit, which aren’t issued before mid-February, the IRS noted. The previous year’s filing data included tax returns claiming these credits. The value of these tax breaks can be substantial, even resulting in five-figure refunds, in some cases.

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Typically, you can expect a refund when you overpay taxes throughout the year via paycheck withholdings or quarterly estimated payments. By comparison, there’s generally a tax bill when you haven’t paid enough.

Filing season numbers will ‘even out’

‘Don’t call the IRS’ for refund updates

The latest filing statistics come amid mass layoffs for the agency as Elon Musk’s so-called Department of Government Efficiency, or DOGE, continues to cull the federal workforce

It’s unclear exactly how the staffing reduction could impact future taxpayer service. But experts recommend double-checking returns for accuracy to avoid extra touch points with the agency.

“Don’t call the IRS looking for your refund,” said Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals. 

You can check the status of your refund via the agency’s “Where’s My Refund?” tool or the IRS2Go app, which is “available 24 hours a day,” O’Saben said.

Typically, the agency issues refunds within 21 days of a return’s receipt. But some returns require “additional review,” which can extend the timeline, according to the IRS.

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Gold prices have spiked in 2025 — what investors need to know

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An attendant holds 1-kilogram gold bars on Feb. 17, 2025.

Akos Stiller/Bloomberg via Getty Images

Gold prices are popping. But investors should avoid the temptation to chase a shiny object, investment experts said.

The SPDR Gold Shares fund (GLD), which tracks the price of gold bullion, is up about 11% in 2025 as of 2 p.m. ET Tuesday. Returns are up about 42% over the past year. (Prices were down more than 1% on Tuesday.)

Gold futures prices are also up about 10% year-to-date and currently 36% higher compared to the price a year ago. 

By comparison, the S&P 500 U.S. stock index is up about 1.5% in 2025 and 17% in the past year.

Lee Baker, a certified financial planner, said he wasn’t getting client calls about gold a year ago. Now, he fields them regularly.

He thinks investors would be wise to remember the classic rule from Warren Buffett, “Be fearful when others are greedy, and be greedy when others are fearful.”

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“It feels to me everyone is starting to get greedy as it pertains to gold,” said Baker, owner and president of Claris Financial Advisors, based in Atlanta, and a member of CNBC’s Advisor Council.

The typical investor shouldn’t have an allocation to gold that exceeds 3% of a diversified portfolio, Baker said.

Investors enticed by lofty returns may make a knee-jerk reaction and buy a big chunk of gold (literally or figuratively) — and, in the process, make the common investment mistake of buying high and selling low, he said.

“If you’re going to make money with gold you need to buy and sell it — and hopefully sell it at right time,” Baker said. “And if you’re getting in now, are you buying at a peak? I don’t know.”

Why gold prices are up

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The sanctions led some central banks — in China, most notably — to buy more gold instead of U.S. Treasury bonds to avoid the potential difficulty of accessing assets denominated in U.S. dollars during a future geopolitical conflict, Samana said.

That has driven up gold demand higher compared to the price a year ago — and prices with it, he said.

“Don’t chase” gold returns, Samana said: “As a whole, you probably want to hold off on precious metals at [current] levels.”

Experts don’t expect gold to continue to shine.

“There’s no reason in my mind gold will continue to have a significant uptrend, barring — and I certainly hope not — some sort of protracted war,” Baker said.

How to invest in gold

Sanshandao Gold mine in Laizhou, Shandong province, China, on Jan. 17, 2025. 

CFOTO/Future Publishing via Getty Images

Similar to Baker, Samana believes it may be okay for investors to hold 1% to 2% of a well-diversified portfolio in gold.

Investors interested in buying gold should consider it as a piece of a broader commodities portfolio, which likely includes allocations to energy, agriculture and base metals like copper alongside precious metals like gold, Samana said.

Wells Fargo’s investment models have an overall commodities allocation that ranges from 2% for conservative investors to 7% for more aggressive growth, he said.

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