[Jill]

If the Fed cuts interest rates, does it happen the next day? Reason for asking:

I am considering getting into some CDs, but right now just enjoying the higher rates in my MM account without funds being locked up.

I would want to time the CDs before rates drop significantly (if they do).

[Bill]

Actually, cd rates typically change BEFORE the fed makes a move. The fed doesn’t like to surprise anyone, so they offer some guidance about what will happen be happening the rest of the year and lenders build that into their longer term cds.

[Frank]

That’s not how interest rates work. The issuer of the CD decides what to charge based on their own forecast of interest rates.

They will likely front-run the Fed.

But if this is actually important in your financial life, you are holding too much cash and need to invest it in something that will actually grow.

[Grant]

Reates will only drop (most likely) .25. So not a huge amount and probably won’t see 3.5% till late 2025.

[Marty]

You are most likely talking about a miniscule amount of dollars to potentially gain.

[Rick]

Bank cd tie to fed funds rate is not regulated to be any specific timeframe or really at all.

Some banks do it as soon as they can like same day (usually when it benefits their interest income game) but some banks wait to see how competition forces their hand days or more than a week later.

Do you think rates are going higher?

If no or low chance, is there any advantage to playing rate timing games?

And what is the upside impact if you get it right (hundreds of dollars) vs wrong (more than hundreds).

It’s a market timing game of which you are but a grain of sand in the hourglass.

Good luck.

[Mark]

so ur asking us how to time the market…….also understand putting money in CD (certificates of depreciation) guarantees that ur money will not outpace inflation while also not being liquid.

[Max]

I ladder 4 cds and have been doing so for a couple years. I use the interest as income.

The last two cds I have purchased have been the highest interest rate so far.

(June and Aug for 12 months). Even when interest rates drop a little I don’t think CD interest rates will drop much At least not until mid 2025 so the ones I’m locking into 12 months now I’m good.

The problem will be when those mature.

Then I will probably move to Tbills

[Zach]

It is almost guaranteed that the Fed will cut interest rates by 25-50 basis points at its September meeting unless we get a crazy hot inflation report which is very unlikely.

I would expect CD rates to start to change a bit before to a bit after the Fed meeting in September.

You can expect the next interest rate cut in November.

[Joel]

The Federal Reserve Bank changes the Interbank Overnight Lending Rate as soon as the FOMC releases the results of the latest meeting.

But CD rates are not directly tied to this rate.

[Bill]

CDs, Money Market accounts, and U.S. Treasuries have already experienced falling interest rates.

Mortgage rates have also dropping.

The market and lenders already know its happening soon, and are lowering rates.

You risk even lower savings rates if you wait too long.

[Cage]

I just picked up a couple of high-yield CDs with this potential cut in mind, but I certainly didn’t make any drastic changes to my overall holdings.

Mainly just wanted to lock in a few short term, high yield options before they went away.

I wouldn’t recommend completely cutting out of your liquid holdings and locking your money away, that would be quite the gamble without much upside.

[Lindsay]

The rates you are seeing from most banks (those who know what they’re doing) have Sept’s expected 25bps cut already baked in and depending on tenor, future expected cuts may also be reflected in offered rates too.

Banks treat deposits as their borrowing cost and they make investments with those deposits that earn a higher yield.

The difference between their return on loan and what they pay on deposits is their net interest income.

[Author]

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