How Interest Rate Cuts Could Affect Your Finances

Shana and Jason discuss the potential impacts of Federal Reserve rate cuts on various financial instruments and the broader economy. They examine how rate changes could affect CDs, money markets, and mortgage rates, and express concerns about inflation and unemployment. They also delve into issues of labor force counting, government spending, and the Fed’s monetary policies, emphasizing the significant role of government spending in driving inflation:

  • Impact of Rate Cuts on Average Americans:
    • Lowered rates will affect CDs and money markets, with short-term rates decreasing slowly.
    • Those with maturing CDs might consider locking in long-term rates.

  • Mortgage Rates:
    • Mortgage rates are more complex and not immediately affected.
    • More mortgage applications could influence rates.
    • Potential buyers might delay purchases in anticipation of lower rates.

  • Inflation Concerns:
    • If inflation doesn’t decrease, it may hinder rate cuts.
    • Rising unemployment might influence rate decisions.

  • Labor Force Counting:
    • The entire labor pool isn’t fully counted, including influxes of cheap labor at the southern border.
    • The real unemployment number would be different if everyone was counted.

  • Monetary Tools:
    • Focus on rates, but also quantitative easing and tightening.
    • Government spending continues despite supposed tightening.

  • Inflation and Government Spending:
    • Government spending is heavily influencing inflation.
    • Politicians are not addressing spending cuts but are focused on distributing more money.

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