Whatever the Fed Decides Today, Check Your Statement Anyway

The Federal Reserve wraps up a two day meeting today with the funds rate sitting at 3.5% to 3.75% and the market split on whether it moves. Coverage will treat the answer as the story. For most households the answer is close to irrelevant, and the reason is worth understanding once, because it explains why Fed news so rarely shows up in your finances.

Sponsored by Brownstone Research

Act now before it’s too late

Editor’s Note: Jeff Brown and Marc Chaikin, two investment legends who picked Nvidia 10 years ago, are predicting that by the end of this month, Elon Musk’s new AI breakthrough will collide with a strange market pattern with a flawless 100% track record of massive market gains. Click here to see the details or read more below because the last time this happened everyday folks had a chance to turn $10,000 into as much as $350,000 in just about 12 months.

Dear Reader,

The two investment legends who picked Nvidia 10 years ago…

Just issued a shocking new AI prediction involving the world’s first trillionaire.

They believe that by the end of this month…

Elon Musk’s new AI breakthrough they call “M.A.G.I.”...

Will collide with a strange market pattern with a flawless 100% track record of massive market gains.

Click here to see the details because the last time this happened…

Everyday folks had a chance to turn $10,000 into as much as $350,000 in just about 12 months.

Regards,

Lindsey Hough
Managing Director, Brownstone Research

The Fed Sets One Rate, and You Borrow at Others

The Fed controls what banks charge each other overnight. That is the entire mechanism. Everything else is transmission, and transmission is slow, partial, and different for every product.

Credit cards move fastest, because they are tied to the prime rate. But issuers widened their margin over prime substantially during the last cycle and never gave it back, which is why the average card rate has been sitting near 25% through a year of the Fed doing nothing at all.

Mortgages barely respond, because a thirty year loan is priced off the long end of the Treasury curve, and the long end trades on inflation expectations and government borrowing rather than on the overnight rate.

Savings accounts respond when banks feel competitive pressure and not otherwise. That is why deposit rates rose slowly on the way up and tend to fall quickly on the way down.

A Quarter Point Is Smaller Than It Sounds

Take a $6,000 credit card balance. A quarter point changes the annual interest by about fifteen dollars. Meanwhile the spread between a 25% card and a 12% credit union card on that same balance is roughly $780 a year.

The Fed is arguing over the fifteen. The seven hundred and eighty is sitting in your own paperwork, unexamined.

What Actually Deserves Attention Today

The statement language matters more than the number, because it shapes what long rates do next, and long rates are what price mortgages and set the return on the safe end of a retirement portfolio.

If the committee signals more tightening ahead, thirty year yields tend to move, and that reaches households through housing rather than through cards.

Final Take

Today is a good prompt for a fifteen minute review, not because of the decision but because the calendar reminded you.

Pull up three numbers. The rate on your highest balance, the yield your cash is currently earning, and the rate on any adjustable product that resets in the next year.

If the cash number starts with a zero, that is fixable this week and worth more than any Fed move: money market funds and Treasury bills are paying close to the funds rate while most bank savings accounts are not. If the card number starts with a two, a balance transfer or a credit union loan is worth more than several years of Fed decisions combined.

The committee will do what it does. The spread between what you are paying and what is available is the part that was always yours to change.

Written by Deniss Slinkins
Millionaire Core