The Fed Held Rates Steady in Late 2023. Here's What That Now Means for You

The Federal Reserve made it clear in 2022 that it was fed up with inflation. To be fair, it's the job of the Fed to control monetary policy and take steps to stabilize the economy when things go haywire, such as when inflation starts to surge. So it's not shocking or even inappropriate that the Fed opted to raise interest rates multiple times in 2022 and 2023 to help bring living costs back to a more moderate level.

Unfortunately, though, those rate hikes have had a negative impact on some people's personal finances. That's because they've driven the cost of borrowing up.

These days, it's more expensive interest-rate wise to sign a mortgage, auto loan, or personal loan than it was a couple of years ago. And as such, a lot of people have been forced to hold off on borrowing.

But that's exactly what the Fed wants. To cool inflation, consumer demand needs to wane and spending needs to slow down. A good way to make that happen is to raise interest rates so that borrowing costs more and becomes less appealing.

But because inflation has been cooling nicely, the Fed was able to hit pause on its interest rate hikes during its last three meetings of 2023. But while that's a good thing in theory, it does leave a lot of consumers stuck in limbo.

A mixed bag of sorts

The fact that the Fed didn't raise rates during its last three meetings is a positive thing for consumers with a need to borrow. It's also a good thing for those with variable-interest debt, such as people with credit card balances.

However, for consumers looking to borrow in the near term, a pause of interest rate hikes isn't enough. People who need to borrow money want to see interest rate cuts, because that's what it'll take to make loans less expensive. Right now, would-be borrowers are sort of stuck in a holding pattern.

Will the Fed cut rates in 2024?

Late last year, the Fed signaled that rate cuts may be in store for 2024. But that doesn't mean they're a guarantee, and much will depend on how inflation levels are measured. The central bank will also look at other economic indicators, like the employment/unemployment rate, to determine whether rate cuts are appropriate or not.

If the Fed has reason to believe that inflation is tracking in the right direction and that the economy isn't overly heated, it may move forward with rate cuts. That could bring the cost of borrowing down. But until that happens, borrowing will remain expensive.

If you've been waiting on rate cuts to put a loan in place, know that you might still have to hold out a while. But one thing it pays to do in the interim is work on boosting your credit score. You can do so by paying all bills on time, whittling down credit card balances if possible, and checking your credit report for errors (which you can do for free on a weekly basis).

The higher your credit score, the more likely you are to snag a competitive interest rate on a loan -- in the context of whatever "competitive" happens to mean at the time of your application. But if you're able to sit tight for a few more months, you may find the cost of borrowing does indeed start to drop.