The FED’s 50 Basis Point Interest Rate Cut
CFP® Certificants in the News
CFP Board’s most recent newsletter advises that the “Federal Reserve announced a significant 50 basis point rate cut, surprising many who anticipated a smaller 25 basis point reduction.” CFP Board Ambassador Kurt Whitesell, CFP® highlighted the opportunity for investors to lock in high rates on CDs before further interest rate drops.” The newsletter refers to Bankrate’s September 19, 2024 blog article on this subject. According to Bankrate’s key takeaways.
- “Leading rates on CDs hold steady…after [the] Federal Reserve decision to cut rates by 50 basis points.
- The current leading CD rate across terms is 5.15% APY.
- For most CD terms, national averages are only yielding around one-third of the highest rates.”
The author suggests that the decision to invest now in long-term, fixed income securities, especially brokered CD’s and long-term bonds, is more nuanced than just yields. For example, what will happen to the market value of long-term bonds if yields increase in the next few years? Answer—bond prices are inversely related to interest rates. An increase in yields generally result in a drop in bond prices. On the flip side, falling yields tend to increase the value of long-term bonds.
What’s the right move? There may be no “one size fits all” solution. Clients should consult with their Financial Advisor to determine what’s best for them in this potentially volatile yield market.
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