Money Monday: What a possible Fed rate cut could mean for Oklahoma consumers

Federal Reserve Chairman Jerome Powell hinted last week that interest rates may be cut when the Fed meets next month. On this week’s Money Monday, financial expert Paul Hood explained what that could mean for consumers and how to prepare.

What does a possible rate cut mean for the average consumer?

“What you have to remember is, what is interest? Interest is the cost of money. It’s the time value of money,” Hood said. “So what really matters is which side of that equation are you on. Are you receiving interest? Are you paying interest?”

Should people hold off on big purchases?

“If you’re paying interest, then maybe, you know, you should delay buying a car if interest rates are gonna fall,” Hood said. “You should consider when they do fall, maybe refinancing your home because you can save substantial money—especially if you can lock it in if the interest rates are lower.”

He added that experts expect “multiple rate reductions potentially before the end of the year.”

How could savers be impacted?

“If you’re receiving interest, then it might be a good time to try to lock in, if you’re doing CDs, lock in maybe some longer-term CDs before the rates drop,” Hood said.

He also pointed out that when interest rates fall, the stock market often rises. “Some people, I’m not necessarily recommending this, but will make a change in their 401(k) to get a little more aggressive in anticipation of an upside.”

Should investors make changes now?

“The main thing is just be prudent,” Hood said. “Don’t make financial decisions based on fear or greed, but understand that’s a cost of a dollar, and if you’re, depending on what side of that equation you’re on, you can make some choices for the next short period.”

How connected are mortgage rates to Fed rate cuts?

“There’s a lot of people that are adamant that they’re not tied together, but the bottom line is the cost of money,” Hood said. “Whether you’re building a home, and it costs less for that builder to get his line of credit to do things, so the cost of the home might come down. So they are tied together, but they’re not directly. Just because we have an interest rate drop doesn’t mean mortgage rates are going to go down. But they generally follow suit to a degree.”

What’s the takeaway for consumers?

“Again, it’s all timing. What do you think, and do you want to lock in for the long term right now, or maybe wait a few more? Be prudent,” Hood said.