The Federal Reserve is meeting again on July 30 and 31, 2024, when the central bank will discuss the possibility of cutting interest rates.

At its last meeting in June, the Federal Open Market Committee held the federal fund’s target rate steady at 5.25% to 5.5%, where it’s been since July 2023.

To combat inflation, the rate was raised 11 times between March 2022 and July 2023. Inflation has cooled, but the Fed has signaled it wants more positive data before pulling the trigger.

In June, the consumer price index fell to 3%, the lowest it’s been in over three years. At that point, the Fed projected the fed funds rate would be cut to 5.1% by the end of 2024.

The CME Group’s FedWatch tool, which measures the probability of a rate adjustment, has predicted the first cut will come in September.

The Federal Open Market Committee meets eight times a year to discuss whether to adjust the federal funds rate, a benchmark that governs overnight lending between commercial banks.

Led by Federal Reserve Chair Jerome Powell, the group of 12 considers inflation, employment and the rate of borrowing, among other economic factors. The committee has met four times so far in 2024 but declined to change rates.

The remaining meetings this year are:

• July 30 and July 31, 2024
• Sept. 17 and Sept. 18, 2024
• Nov. 6 and Nov. 7, 2024
• Dec. 17 and Dec. 18, 2024

Amy Hubble, principal investment advisor with Radix Financial, agrees there won’t be an adjustment until at least September. When the rate does drop, she added, it won’t be a massive decline.

“If they cut 0.25% at a time, that’s 12 cuts over several years,” Hubble said. “So this isn’t something that’s going to happen quickly.” 

The Federal Reserve doesn’t directly control the interest rates your bank charges, but it does influence them: The Fed sets the federal funds rate, which determines how much banks can charge each other when lending or borrowing excess reserves overnight. Banks, in turn, adjust the rates they charge for credit cards, mortgages, personal loans and other financial products.

The fed fund rate has been 5.25% to 5.50% since July 2023. That’s the highest since January 2001, when it rocketed to 6.00% after the dot-com bubble burst.

When the Fed does lower its benchmark rate “it will affect everything a little differently and in different magnitudes,” Hubble said. “CDs and other shorter-term cash vehicles, like money markets and bank savings rates, will see the rates drop almost immediately.” 

Changes to mortgage rates are more complex because creditworthiness and loan terms play a bigger role. 

“These rates may not necessarily move exactly in tandem with a reduction in the federal funds rate,” Hubble said. “But it’s still fair to assume that a lower fund rate will also mean a lower mortgage rate.”

Explore adjustable-rate mortgages

Hubble is advising clients to look into adjustable rate mortgages (ARMs). These home loans start with a fixed mortgage rate for a set timeframe. Once that time passes, though, your rate changes at certain intervals.

A 7/1 ARM, for example, means you’ll get a fixed rate for seven years, and then the rate will adjust every year. With mortgage rates likely to drop, a variable rate could be attractive.

“Even though we don’t know the exact timing, the Fed has signaled that it is done with the hiking cycle,” Hubble said. “We would not expect mortgage rates to move higher from here.”

PNC Bank is a top choice for ARMs, with options for 5/1, 7/1 and 10/1 mortgages and adjustable rates available on conforming, VA and FHA loans. For homebuyers who meet income or location requirements, PNC offers a $5,000 closing cost grant.

Improve your credit score 

Your credit score is one of the biggest factors lenders use to determine whether you’ll get approved and the rate you’ll be offered. If you’ve been waiting for rates to go down to apply for a mortgage or personal loan, now’s the time to make sure your credit is in good shape.

A 620 FICO score is considered the baseline for a conventional mortgage. But if you have at least 750, you’ll qualify for the most competitive rates. To raise your score:

• Make on-time payments in full. Payment history is the most important element of your credit score. (You’ll also avoid late fees and interest charges.)
• Request higher credit limits. If you raise your credit limit and keep your balance the same, it’ll lower your credit utilization ratio, which accounts for 30% of your FICO® Score. (Just don’t think of the additional credit as a green light for more spending.)
• Hold off on new lines of credit. The applications could require hard credit inquiries that ding your credit score. If you’re approved, it will also lower the average age of your accounts.

Payments to phone, internet and utility companies aren’t typically sent to credit-reporting agencies. With eCredable Lift®, though, you can have information from up to eight accounts sent to TransUnion. So your on-time payments can help you raise your credit score.

The deluxe eCredable LiftLocker adds budgeting tools, identity theft alerts and credit monitoring, among other benefits.

Here are a few financial options to consider once the Fed does slash interest rates.

Refinance your mortgage

If you bought your home when mortgage rates peaked in 2023, now is a good time to look into refinancing. After the Fed cuts the fed fund rate, mortgage rates should decline.

One of CNBC Select’s top picks for mortgage refinancing, Ally Bank offers fixed and adjustable rate terms with no application, origination, processing or underwriting fees. That can save you thousands.

Refinance your student loans

After the Fed makes cuts, interest rates on student loans should drop, as well. Borrowers have felt the squeeze since the three-year moratorium on payments ended in October 2023.

SoFi offers terms of up to 20 years for refinancing student loans, with a 0.25% rate discount if you sign up for monthly autopay.

Pay off high-interest credit cards

The annual percentage rate on your credit cards should drop, too — making it easier to whittle down any outstanding balances.

So, prioritize making sizable payments now before rates go up again later.

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Amy Hubble, principal investment advisor with Seattle-based Radix Financial. A certified financial planner, Hubble received a Ph.D. in consumer economics from the University of Georgia.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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