3 big money moves to do with Fed rate hike still on hold

of Inflation report in May, released today, offers a glimmer of hope for millions of Americans weary of rising prices. While the decline was slight, the report shows that the inflation rate fell month-on-month, decreasing from 3.4% in April to 3.3% in May. And that decline was enough to prompt the Federal Reserve to keep interest rates unchanged at its June meeting.

The Fed has chosen to hold rates frozen at 5.25% at 5.50% for almost a year now in an effort to fight against persistent inflation. Many experts predicted as early as 2024 that the Fed would to start cutting rates in the middle of the year, but improvements in inflation have been slower than expected. On the other hand, the Fed has kept the expected rate cuts in exchange for a more aggressive strategy.

However, there is always a chance that rate changes may occur in the future. For example, the Fed may choose to raise rates if inflation starts to rise again. But if inflation falls sharply over time, the Fed may cut rates all together. With the Fed’s rate hikes on hold for now, what big money moves should you make as a result?

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3 big money moves to do with Fed rate hike still on hold

Here are some key money moves you may want to make right now:

Open a short-term CD at a high speed

With the Fed rate still stuck at a 23-year high, one move you may want to make is to lock in a high rate in the short term certificate of deposit (CD). After all, the current rate environment has caused short-term rates to be higher than long-term rates in many cases. So, a short-term CD can be a smart way to safely grow your savings in this economy.

For example, many major banks and financial institutions offer short-term CDs with rates exceeding 5.5% currently. That’s a high rate overall, but it’s over 10 times higher than the average savings account rate, which is just 0.45% currently. So if you’re looking to maximize your earnings, finding the right short-term CD account makes sense.

And, given that future rate hikes are still on the table, a short-term CD can make sense in other ways as well. For example, most short-term CDs matures in a few monthsso if inflation picks up over the next few months and the Fed chooses to raise rates in response, you’ll be able to roll the funds from your maturing CD into another CD with a higher rate.

So between today’s high CD interest rates and the possibility of future rate hikes, opening the right short-term CD account may be a smart move to make while rates remain on pause.

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Start earning a high rate with a high yield savings account

CDs aren’t the only interest-bearing accounts offering higher rates right now. There are also favorable rates available for certain types of savings accounts, such as high yield savings accounts.

For example, many of today’s high-yield savings accounts offer competitive rates annual percentage yields (APY) available on CD. It’s not uncommon to find high-yield savings accounts rate above 5% currentlyand in some cases, the returns can be even higher.

With deposit rates so high, putting some of your money into a high-yield savings account now will result in returns that outpace inflation. And, you’ll also maintain access to the funds if you need them, which can be a significant benefit over CDs, which usually come with early withdrawal penalties that eats into interest returns.

Pay off expensive variable rate debt

With interest rates staying elevated across the board, every high rate debt it is costing you a lot of money in interest. So it’s a smart time to pay off any outstanding variable rate debt you’re dealing with so you can try to get rid of it faster.

The average credit card rate, for example, is standing close to 22% currently. Rates this high (or higher) make it easy for compound interest to send your balances spiraling out of control. And, if future rate hikes occur, that rate could become even more expensive over time.

But cutting those debt loads won’t just save you money in interest. It will also improve your overall financial situation, making it easier and more affordable to borrow money, if you need to, when rates eventually start to fall. So there are many benefits to tackling that high-rate debt now that the Fed has stopped raising rates again – and there are many options for dealing with your credit card debtalso.

After all

While it may make sense to tackle your high-rate debt and consider opening a short-term CD and high-yield savings account now, it’s also important to understand that every situation is different. On the other hand, you may want to run the numbers and weigh all the factors before making any moves. That way, you can pursue the options that make the most sense for you—ensuring that you’re positioned to meet all of your short- and long-term financial goals.