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The Best Options for Rebuilding Your Credit Score in 2021

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The Best Options for Rebuilding Your Credit Score

A strong credit score is a vital part of your overall financial health. Rebuilding a damaged credit score, however, can feel like an uphill battle at first, but with a little research, time and patience, there are plenty of avenues you can take in order to rehab a flailing credit score. It all begins with identifying your starting point.

How bad is your bad credit score?

Before taking the first step to rebuild a bad credit score to a good one, let’s determine if your score is even bad. Where do you fall in the range of FICO® credit scores? You can find out your score by reading our guide to getting your free credit score.

Below you’ll find what your credit score is considered, with ranges from Experian.

  • Above 740: Excellent Credit
  • 670 – 739: Good Credit
  • 580 – 669: Fair Credit
  • Below 579: Bad Credit or No Credit Score/Thin File

Know that your credit score isn’t the only factor future lenders consider when evaluating your creditworthiness for a new loan or line of credit. These factors also come into play and can be common reasons for being declined:

  • Your debt-to-income ratio is above 50%
  • You have no credit score
  • You have been building up a lot of debt recently
  • You are unemployed

To focus on improving your credit score, you’ll need to start by getting approved for a new line of credit that reports account and payment activity to the credit bureaus. This may sound impossible if your credit score is in the dumps, but know that there are options specifically tailored to people wanting to rebuild their credit.

Rehabilitating a bad credit score (579 and under)

Look into secured cards

One of the easiest ways to boost a sagging credit score is to apply for a secured credit card.

Secured cards require that you use your own money as collateral by putting down a deposit, which is typically about $200 but can go as high as $2,500 or more, depending on the card and how much you can afford.

Your deposit amount will then serve as your credit limit, although some issuers may grant you a higher credit limit above your security deposit over time as you demonstrate good borrowing and repayment behavior.

The reason secured cards are easier to be approved for is because your deposit protects the issuer in case you miss or skip out on payments. If that happens, then the issuer can use your deposit for repayment.

You can always get your deposit back (minus any fees or outstanding balance due) by either closing the card once your credit score has risen to a more respectable level, or if the issuer “graduates” you to an unsecured card once you demonstrate responsible borrowing and repayment behavior with the secured card over a specified period..

Since your credit limit will most likely be low with your secured card, it’s best to just make small purchases on the card every month and pay off the entire balance in full when the statement is due.

The second-most important factor that plays into your credit score is credit utilization (the most important factor is paying your bills on time). Credit utilization is the amount of debt you’re carrying relative to your credit limit. It’s best to keep your utilization well below 30% of your credit limit.

So, if your credit limit is $200 with a secured card, you don’t want to carry a balance of more than $60 a month on your card (30% of $200). Better yet, pay off the entire balance to bring your utilization down to 0% each month.

To find the best secured card for you, check out what’s available from some of the top card issuers, such as Discover, Capital One or Citi, or your local credit union may have a secured card product. Before you apply, make sure the card you choose reports account and payment activity to all three credit bureaus (Equifax, Experian and TransUnion) instead of just one or two bureaus.

While your credit score won’t increase overnight, with responsible usage over a year or more, you should see a vast improvement.

Make it a habit to monitor your credit score regularly to ensure your numbers are headed in the right direction. Once your credit score rises above 700, you can look at unsecured cards that fit your credit profile, and choose to close the secured card once approved for a new unsecured card, or keep the secured card open to ensure it keeps reporting positive activity to the credit bureaus.

Rebuilding from a fair credit score (580 – 669)

Apply for a store credit card

Odds are you’ve been asked at least once to open a store credit card when checking out. While store credit cards typically come with really high interest rates and low credit limits, they are great tools for folks looking for a way to build or rebuild a credit score as the credit requirements for approval are often much less rigorous than a standard credit card that can be used anywhere.

Some popular store cards issued by retailers include Target, Walmart, Amazon, Kohl’s, Old Navy and more. Many have rewards or discount programs that encourage you to spend at the store each time you visit, but if you can exercise some self-control and just use the card for a small purchase every month and pay off the balance when the statement is due, you’ll avoid racking up a large balance that can escalate very quickly as high-interest charges get tacked on.

Generally, store cards report to all three credit bureaus, but read the fine print to ensure the one you choose to apply for does report to all three.

To avoid spending more than you should with the card, you may want to unsubscribe to emails about discounts, sales or deals and don’t even carry it around everyday in your wallet. Read more about the best ways to manage a store card here.

Like secured cards, store cards often come with very low spending limits at first, so remember to keep your spending below 30% of your credit limit every month, which will help your credit score. And if you are rejected for a store card, it’s probably best to revisit secured cards as your best tool to rebuild your credit instead.

With proper credit behavior, you can see your score rise and then you may be able to qualify for a store card.

Check if you prequalify before you formally apply

If your credit score is in the high 600-range, you may want to consider checking to see if you’re prequalified for any cards.

Prequalification may help minimize your chance of rejection upon applying because the card issuer just performs a soft pull on your credit rather than a hard pull. A soft pull of your credit history doesn’t harm your credit score whereas a hard pull (which is done when you formally apply) can knock 5-10 points off your credit score each time (although the impact of that hard pull will drop off after a year).

Just know that even if you are prequalified for a card doesn’t guarantee approval as the issuer will do a deeper dive into your credit profile when you formally apply.

Again, the goal is to use less than 30% of your total available credit. Pay your bills on time and in full. And keep pumping that positive information onto your credit report until your credit score reaches the 700+ mark.

Another option to consider is becoming a secondary or authorized user on another person’s credit card. For example, you can ask a family member who has a great credit score and who always pays their bills on time to add you to one of their credit cards as an authorized user. Then the account and payment history associated with that card will be reported to the credit bureaus under your name, giving you an instant credit boost.

Just know that if you choose to use the authorized user card (you aren’t required to use the card to have the account reporting to your credit file), the primary account holder is ultimately responsible for payment. To avoid damaging a relationship, don’t use the authorized user card unless you and the primary account holder come up with a mutual agreement of how any charges you make with the card will be paid.

Once your credit score improves to a point where you can qualify for a card on your own, then you can request removal as an authorized user after you are successful in getting approved for your own card.

What you need to avoid

Access to credit and loans when you have a poor credit score may come easier than you expect, but that should also be a danger sign.

There are many lenders who are willing to provide lines of credit or loans to people with poor credit, however, a lot of these options are often predatory and can involve numerous fees combined with very high APRs. That’s why it’s very important to understand all the terms of any product you sign up for or else you may find yourself stuck in a never-ending repayment cycle.

If you’re simply trying to rebuild your credit history and improve your credit score, then there is no need to take these offers.

Here are some options you should avoid when trying to rebuild credit:

1. Payday and Title Loan Lenders – There is never a need to take out a payday or title loan if you’re trying to merely rebuild or establish credit history. Most of these lenders don’t report to the bureaus and you’ll likely end up in a painfully vicious cycle of borrowing and unable to pay off what you owe.

2. First Premier – This bank claims to want to offer people a second chance when it comes to their finances, but its fee structure and fine print prove the exact opposite. First Premier charges you a processing fee just to apply for a credit card. Then it levies an annual fee and most cards only come with a very low credit limit where the fees are deducted from, leaving you with very little credit to work with.

The APR on these cards can be over 30% and you may also be charged with a monthly servicing fee or even a credit limit increase fee. You’d be better off saving up $200 for a secured card deposit with more friendly terms.

3. Credit One – Credit One does an excellent job of confusing consumers into thinking they’re applying for a Capital One card. The logos are eerily similar and easily confused.

Creditone

Capital one

While Credit One is not as predatory as First Premier or payday loans, there is really no need to be using one of these cards to rebuild your credit score.

Credit One cards can have high annual fees that are deducted from your initial credit limit. For example, receiving a $300 credit limit on a card with a $75 annual fee means you’ll only have access to an initial $225 credit limit. Rather than take the chance of being charged a high annual fee, we again recommend saving your money and using a secured card with no annual fee to begin rebuilding your credit score or applying for a store card.

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September 2021 Fed Meeting — Summer of inflation could spur asset tapering conversation

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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As the U.S. economy continues to navigate uncertainty regarding the COVID-19 pandemic, the Federal Reserve Open Market Committee (FOMC) will be announcing whether they will adjust or maintain their current monetary policy. Throughout the pandemic, the Fed has tried to spur economic activity by purchasing securities and slashing the federal funds rate — while August data from the U.S. Bureau of Labor Statistics (BLS) reflected further increased inflation.

The Fed’s first step toward tightening its monetary policy will be to ease its securities purchases, but there hasn’t been an announcement as to when that will happen yet.

Ultimately, the Fed will likely view current inflationary trends as transitory and the economic recovery from the pandemic as incomplete. Whether FOMC Chairman Jerome Powell, who stated that “it could be appropriate to start reducing the pace of asset purchases this year” during the Fed’s Jackson Hole Economic Policy Symposium last month, announces the schedule for those reductions will be one of the most closely watched questions for this Fed meeting.

Our September 2021 Fed meeting predictions

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Key takeaways

  • Fed could announce the tapering of asset purchases
  • SEP may forecast earlier interest rate changes

Fed could announce the tapering of asset purchases

Inflation has become a hot topic in Washington, D.C. as lawmakers debate the effects of the significant fiscal stimulus and loose monetary policy: those tactics may have protected the economy from falling into a depression or recession, but some are concerned with the long-term consequences in terms of inflation. In previous meetings, Powell has stated that the Fed believes the inflation to be confined to specific sectors that have been especially affected by the pandemic — a stance that’s corroborated by the August data, which reflects a 25% increase year over year in the energy sector.

The Fed has consistently indicated that they will announce any policy changes well in advance of their implementation, and if the FOMC wants to begin tapering its asset purchases before the end of the year, they’re running out of time to announce that decision — although it’s been hinted at, particularly during the Jackson Hole Economic Policy Symposium. Even though unemployment is still over 5%, perhaps due to some anomalous labor market conditions, a formal tapering announcement should come soon.

SEP may forecast earlier interest rate changes

The Fed will be releasing its Summary of Economic Predictions (SEP), which contains projected changes to real gross domestic product (GDP), the unemployment rate and inflation, as well as each FOMC participant’s assessment of where the federal funds rate will land in the coming years. In the March SEP, only four of the 18 participants projected an increase to the federal funds rate by the end of 2022; in June, seven participants did. That number could tick upwards again.

Powell has maintained that the Fed would need to see “substantial further progress” on inflation and unemployment in order to consider future changes, and that asset tapering will happen before a change to the federal funds rate. If opinion slides further toward accelerating a rate increase, it could indicate confidence that progress has been made — or that inflation is more of a concern than the Fed has publicly acknowledged. Regardless, that rate increase won’t happen until 2022 at the earliest.

Fed meeting dates in 2021:

Here is the FOMC’s calendar of scheduled meetings for 2021. Each entry is tentative until confirmed at the meeting proceeding it. For past meetings, check the next section to catch up on our pre-game forecasts and after-action reports for what happened in 2020.

Past Fed Meeting Coverage in 2020 and 2021

Read our previous analyses on each of the Fed meetings that happened this year. See how Fed policy has changed by clicking on the drop-downs below.

What Happened at the July 2021 Fed Meeting

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Key takeaways

  • Powell revealed little detail about how or when future changes to monetary policy will come, even as the Fed discusses future tapering of securities purchases.
  • Despite short-term inflation well over 2%, the Fed will not be changing its interest rates, citing unemployment levels and the transitory nature of the inflation.
  • Uncertainty surrounding the COVID-19 pandemic and delta variant impacts the economic recovery and the Fed’s monetary policies.

No updates as to when Fed will taper asset purchases

A consistent theme of Powell’s press conference was that while the U.S. economy has shown signs of strength during the ongoing recovery from the COVID-19 shock, substantial further progress had yet to be made. Powell was noncommittal when asked what specifically constitutes substantial further progress and cited numerous labor market factors that go into considerations of what constitutes maximum employment — an area where further progress needs to be made.

He did, however, disclose that the FOMC had discussed the “timing, pace and composition” of future changes to the Fed’s asset purchasing policies. The Fed’s asset purchases were a key element to its COVID-19 strategy: Initially, they helped stabilize financial markets, and they have helped an accommodative monetary environment.

Powell again stressed that the Fed would be transparent with future policy changes but also suggested that the economy wasn’t ready for the Fed to change its course.

Fed not changing tactics in response to inflation

Even though June inflation numbers were higher than expected, the Fed maintained its position that even if short-term inflation runs well above 2%, long-term inflation expectations are well-anchored to the Fed’s 2% goal. Powell cited the auto market for new and used cars, as well as rentals, for being significantly affected by pandemic-related supply chain constraints. The Fed believes that those disruptions, which are driving current inflation, will eventually wane.

“As the reopening continues, bottlenecks, hiring difficulties and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect,” Powell said. Unless long-term inflation expectations increase, the Fed won’t change its approach in response to inflation it views as transitory.

Pandemic continues to affect recovery, monetary policy

The U.S. continues to fight the COVID-19 pandemic as vaccination rates plateau and cases rise across the country, fueled by the delta variant. As the Fed debates future policy changes, they’re taking the pandemic into account — how it’s impacted supply chains, labor markets and global trade.

Powell noted that the U.S. economy has grown more resilient with successive waves of COVID-19, but acknowledged that uncertainty around the public health impact of another wave could negatively impact the economy. He also mentioned that the pandemic will continue to impact the labor market decisions of those who are especially affected by the pandemic.

Significant changes are unlikely until substantial further progress is made toward defeating COVID-19 and attaining maximum employment.

What Happened at the June 2021 Fed Meeting

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Key takeaways

  • The Fed’s newest Summary of Economic Projections (SEP) contains revised predictions, including a possible earlier federal funds rate hike.
  • The Fed affirms its view that although signs of improvement are not as hoped so far, the goal is to continue current tactics.
  • Despite concerns of overcorrecting or ending up with high inflation and low employment, the Fed remains confident in a strong economy by next year.

Summary of Economic Projections (SEP) revised

An updated Summary of Economic Projections (SEP) was released, showing members’ views on the potential future of GDP growth, inflation, unemployment and the federal funds rate through 2023. By the end of 2023, FOMC members predicted there could be an increase of the federal funds rate, despite their earlier, more widespread belief that this rate could stay near zero going into 2024.

In addition, members had a median federal funds rate projection of 0.6% by the end of 2023 — up from March’s median federal funds rate projection of 0.1% for the same time period. The increase is likely due to stronger growth and progress expected in the labor market this year.

Still no major changes expected

In his opening statement at the press conference, Powell reiterated that we are in an unprecedented time where no one can really predict what happens with the economy. While the vaccine has led to a decrease in COVID-19 spread, we’re not quite out of the woods. As such, many of the factors that the pandemic brought with it affecting the economy will continue to do so for quite a while..

Powell noted that the recovery will rely in part on halting production shortages — and when these shortages are resolved, the expectation is a significant positive effect on the economy and its reopening. But for now, the Fed continues to stick to its plan of waiting to see what happens.

“We at the Fed plan to do everything we can to support the economy for as long as it takes to complete the recovery,” said Powell.

Despite concerns, inflation is as expected

Although many have expressed concerns that inflation might be increasing faster than acknowledged, Powell remained confident that what’s happening was not unexpected. He also maintained that the Fed is continuing to keep a close eye on inflation and if something needs to be adjusted, it is prepared to make those changes as needed. The plan is to maintain the current rate until the labor market reaches maximum employment and inflation reaches 2%, and is on track to exceed 2% for some time.

What Happened at the April 2021 Fed Meeting

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Key takeaways

  • Fed reaffirms commitment to current tactics of zero-bound funds rate and securities purchases.
  • The Fed expects some future period of inflation above 2% as part of overall trajectory.

No major changes are coming

In his opening statement at a press conference following the Fed’s April meeting, Powell was careful to clarify that the economic progress made since the onset of the COVID-19 pandemic was far from complete. He once again pledged that the Fed would keep the federal funds rate at the 0% to 0.25% range and continue purchasing securities to bolster the economy until substantial progress is made.

At this point, Powell says it is “not time yet” to begin tapering asset purchases. However, he reassured the public that advanced notice will be given when it is: “We’ve said that we would let the public know when it is time to have that conversation, and we said we’d do that well in advance,” Powell said.

Beyond reiterating his commitment to the Fed’s goals of achieving maximum employment and price stability, Powell also insisted that there aren’t specific criteria for when the Fed will eventually change course — both in terms of virus control and inflation rate. Rather, the Fed expects to maintain its current policies for a while as it sees how the economic recovery continues to play out.

Inflation is as expected so far

Despite some concerns regarding an expansionary monetary policy’s potential to cause significant inflation, the FOMC indicated at its April meeting that it remains unconcerned.

“It seems unlikely, frankly, that we would see inflation moving up in a persistent way that would actually move inflation expectations up while there was still significant slack in the labor market,” said Powell in response to a question as to whether the Fed would begin to consider a change in rates. Instead, the Fed seems to view minor inflation as a worthwhile cost to an economic recovery, and is thus unlikely to overreact to price spikes as it pursues its goal of achieving maximum employment.

That being said, the Fed does anticipate some inflation as recovery from the pandemic-induced downturn continues. The Fed’s mandate calls for “stable” prices, and there tends to be a trade-off between employment rate and inflation rate. Additionally, pandemic-related supply chain issues have resulted in short-term spikes in inflation. For now, the FOMC is aiming for inflation slightly higher than 2% in the short term in order to achieve an average rate of 2% over the long term.

What Happened at the March 2021 Fed Meeting

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Key takeaways

  • Fed continues to hold the funds rate near zero and maintains current policy measures.
  • Members revise economic outlook to reflect faster recovery than expected.

Fed monetary policy remains unchanged

The Fed reiterated its commitment to its planned monetary policy in its March meeting, keeping the federal funds rate at the 0% to 0.25% range. Powell made clear that the Fed intends to stick to its plan to keep the funds where it is until inflation reaches 2% and is on track to stay at that level for some time, and until maximum employment is reached.

In addition, Powell said that it is “not yet” time to begin talking about tapering asset purchases, referring to the Fed’s commitment to buying up securities at the minimum pace of $80 billion in Treasury securities per month, and $40 billion in agency mortgage-backed securities (MBS) per month. Powell said this would likely continue until we see “substantial further progress — and that’s actual progress, not forecasted progress.”

Economic outlook brightens for 2021

The Fed’s March Summary of Economic Projections (SEP) showed a more positive outlook than what the Fed presented at its meeting in December, largely due to a start to 2021 that was better than expected in terms of the pace of economic recovery.

FOMC members predict that gross domestic product (GDP) could increase by 6.5% in 2021, marking a significant jump from the anticipated 4.2% growth in December. Inflation is also expected to hit 2.4% by the end of the year, revised from an anticipated 1.8% increase projected in December. Unemployment is also expected to continue to go down, falling to 4.5% at the end of 2021 and 3.5% in 2023.

Still, the majority of officials don’t expect a rate hike at least through 2023. Notably, however, the number of members who forecasted a hike in 2023 grew to seven of 18 members in March, slightly up from just five in December.

What Happened at the January 2021 Fed Meeting

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Key takeaways

  • The Fed doubled down on its policy strategy and made no changes.
  • Powell maintained that recovery relies heavily on fiscal support and widespread adherence to safety measures.
  • The rise in inflation is not a near-term concern for the Fed.

No further changes to Fed monetary policy

The FOMC unanimously reaffirmed its Statement of Longer-Run Goals and Monetary Policy Strategy at its annual organizational meeting in January. The FOMC made substantial changes to its statement framework in August 2020, when it pledged to examine the “shortfalls” of U.S. employment and aimed for an inflation rate that averages above 2% in order to offset the extended period of time inflation has remained below 2%. The Fed’s January decision only doubles down on these commitments.

As for its policy tools, no changes were made there either. The federal funds rate remains at its near-zero position at the 0% to 0.25% range. The Fed will also continue to buy up securities at the minimum pace of $80 billion in Treasury securities per month and $40 billion in agency mortgage-backed securities (MBS) per month. The committee plans to maintain this pace until “substantial further progress” is made toward achieving maximum employment and stable inflation.

Powell sees a long road of recovery ahead

With at least nine to 10 million people unemployed, small businesses under increased pressure and many other issues to address, “we’re a long way from a full recovery,” Powell said in the post-meeting press conference. The pandemic still poses considerable downside risks to households and the economy, partially due to the slow vaccine rollout and the arrival of new virus strains.

Reiterating what he has said since mid-2020, Powell again noted that fiscal support from Congress and federal administration “will help individuals and businesses weather the downturn, as well as limit lasting damage to the economy that could otherwise impede the recovery.”

In the meantime, Powell also stressed at several points during the press conference that the public should continue to observe social-distancing measures and wear masks. Adherence to these measures, paired with further fiscal support and widespread vaccination, is the basis of the Fed’s hopeful outlook for a stronger economy in the second half of this year.

No need to worry about higher inflation

The Fed doesn’t see a near-term rise in inflation as a risk to the economy. While the Fed expects a burst of spending as the economy fully reopens that could put upward pressure on inflation, it believes that increase will be transient and not particularly large.

In fact, since inflation has averaged below 2% for about 25 years, the Fed would now welcome higher inflation, as per its revamped framework. Plus, Powell said, the Fed is more concerned at this point about getting people back to work and continuing their careers and lives than about the possibility of higher inflation.

What happened at the December 2020 Fed meeting

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Key takeaways

  • The Fed posted a more hopeful outlook for the economy’s near future.
  • Further support from elected officials and the Treasury is crucial to economic recovery.
  • Uncertainties and risks surrounding the economy and its future remain.

U.S. economy could see a recovery as soon as 2021

With the start of vaccine distribution in the U.S. and abroad, Powell and the Fed are hopeful that the economy should be performing strongly within the second half of 2021. By that time, Powell said, more people should be returning to work and businesses should be reopening.

The Fed’s December Summary of Economic Projections (SEP) also indicates a more positive outlook than the Fed presented in September. Participants projected a larger increase in GDP growth for 2021 and a decrease in the unemployment rate for both the end of 2020 and into 2021.

Treasury, congressional support crucial to a 2021 recovery

The Fed’s improved economic outlook depends heavily on the actions Congress takes, which is something the Fed itself cannot control. Powell stressed that with the Fed’s own emergency facilities — granted by Congress and the Treasury — expiring after Dec. 31, 2020, coupled with the expiration of expanded unemployment benefits and eviction moratoriums, there is a need for households and businesses to receive fiscal support. The Treasury, too, could choose to authorize further emergency lending facilities.

Given the latest surge in virus cases and the continued lack of aid from upper levels of government, Powell predicted that the situation will get worse before it gets better, and considers the real issue to be “getting through the next four, five, six months.”

“That is key,” said Powell. “Clearly there’s going to be a need for help there.”

“Now that we can kind of see the light at the end of the tunnel,” he continued, “it would be bad to see people losing their business — their life’s work, in many cases, or even generations of work — because they couldn’t last another few months.” Still, Powell is hopeful Congress’ latest round of negotiations will yield further support.

Powell also noted that this current time of economic turmoil is not the time to focus on the national deficit. In fact, he maintains the risk of providing too much help is nonexistent when compared to the risk of not doing enough.

Expanded SEP illustrates Fed uncertainties

This meeting marks the first time the FOMC released all SEP charts and tables directly after its meeting, providing an undelayed look at participants’ views of economic uncertainty and risks.

This revealed that participants are making their projections regarding GDP growth and unemployment under the assumption of high uncertainty, although many reduced their assumption of risks to GDP growth and unemployment from their September projections. Meanwhile, Fed perceptions of both uncertainty and risk for inflation have decreased somewhat.

Much of this risk and uncertainty stems from Congress’ ongoing negotiations, as well as the many variable factors of the newly released vaccines, including how many people will take it, its efficacy across groups and the speed and scope of distribution.

Two new charts were also added to the SEP to further illustrate the Fed’s uncertainty and risk assumptions over time. These added charts reveal that uncertainty around GDP, unemployment and inflation is at levels not seen since the Great Recession and the years immediately after.

What Happened at the November 2020 Fed Meeting

Direct support from Congress is needed for recovery

Chair Powell made yet another call in November’s meeting for further fiscal support, which he has been doing since April. “Fiscal policy is absolutely essential here,” he said in the post-meeting press conference, noting that the previous robust fiscal response was a critical reason for the recovery we’ve seen so far. Without another relief package, the crisis could be prolonged.

Powell emphasized that direct support from all levels of government is needed to drive further recovery. “There are plenty of people on Capitol Hill, on both sides of the aisle and both sides of the Hill, who see the need for further fiscal action and understand perfectly why that might be the case,” he said.

Lapsed support and financial uncertainty pose risks to economy

Powell identified the lapsing of Coronavirus Aid, Relief and Economic Security (CARES) Act benefits as one of the most prevalent downside risks to the economy and any chance of recovery. For many Americans, the $1,200 economic impact payments that the rescue package provided about seven months ago are now long gone.

Similarly, there is also the risk that households with lost or decreased wages due to the pandemic will run through any savings they have managed to accumulate, as uncertainties over their next paycheck or sufficient unemployment benefits remain. Not only is that devastating for those households, but it would also weigh on economic activity.

Another downside risk that Powell pointed to is the further spread of the coronavirus, as he issued a reminder that this crisis is first and foremost a health concern. Unfortunately, the number of positive cases of COVID-19 continues to rise as we move into colder weather. Continued outbreaks not only means more illness and death, but also the stifling of usual activity, which in turn delays economic growth and recovery.

Fed continues to buy up securities and offer loans

With a stagnant federal funds rate, the Fed has turned its focus to its other tools. For one, the Fed will continue to buy up Treasury securities and agency mortgage-backed securities, which helps to keep the market functioning properly and stimulate the economy. The Fed will also continue issuing loans to eligible, solvent businesses that are able to repay them.

The Fed knows its limited arsenal can only help Americans to a certain extent though. Powell often recognizes that the Fed’s loan facilities don’t help many of the businesses struggling due to the crisis, which is another reason he stressed the need for further government action, as it could more directly aid struggling businesses and individuals.

What Happened at the September 2020 Fed Meeting

Federal funds rate held at zero indefinitely

The FOMC kept the federal funds rate range at 0% to 0.25% at its September meeting. Rates will remain there until the Fed believes that two things are true: One, that employment levels are consistent with maximum employment, and two, that inflation has risen to 2% and is on track to moderately exceed 2% “for some time.”

As for what “some time” means, Fed Chair Jerome Powell didn’t specify, saying only that it means “not permanently and not for a sustained period.” Powell also noted in the post-meeting press conference that rates will remain where they are until the U.S. economy is “far along in its recovery.”

Not all Committee members agreed with this decision. Robert S. Kaplan, president and CEO of the Federal Reserve Bank of Dallas, voted against it, and is instead in favor of maintaining the Fed’s previous stance of keeping the federal funds rate where it is until the Committee was “confident that the economy has weathered recent events” and then allowing for greater policy rate flexibility. Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, also voted against the action, preferring a change in rates once inflation has maintained 2%.

Earliest Fed rate hike could be 2022 or 2023

The latest Fed dot plot, also released at this meeting, indicates that most FOMC members think the fed funds rate will remain where it is through 2023. The fed dot plot illustrates each FOMC member’s projection for the federal funds rate midpoint over the next few years; it is not a policy prediction.

Most of the 17 FOMC members indicated a stagnant federal funds rate through 2023. Meanwhile, three participants marked small jumps over that period, and one outlier participant marked a federal funds rate midpoint between 1.25% and 1.50% in that year. Just one participant predicted a higher federal funds rate for 2022.

SEP indicates a years long recovery

Released every other Fed meeting, the Summary of Economic Projections (SEP) outlines the FOMC’s outlook for the economy for both the short and long term. The September SEP indicates a slow reduction in the future unemployment rate, from 7.60% at the end of 2020, to 5.50% in 2021 and then to 4.60% in 2022. Still, even its prediction for the “longer run” past 2023 — at 4.10% — doesn’t reach as low as the pre-pandemic unemployment rate of 3.50%.

The SEP also indicates that FOMC members expect inflation to stay under 2% until 2023, when it will reach that threshold. If that holds true, we should expect inflation to run slightly higher than 2% for a while after 2023, per the Fed’s new policy framework. Higher inflation will allow interest rates to run higher, giving the Fed more breathing room away from the zero bound when it comes to monetary policy.

Chair Powell calls for more support from Congress

For months now, Powell has stressed that Congress and the U.S. Department of the Treasury must step up to provide further support to Americans and for an economic recovery. Powell predicted in September’s press conference that with no follow-up to the CARES Act legislation and no additional unemployment support or jobs for people to return to, “that will start to show up in economic activity; it’ll also show up in things like evictions and foreclosures and things that will scar and damage the economy.”

Powell also said that broadly, both FOMC members and private forecasters are making their predictions with the expectation that further government relief will come. The question remains, however, just how much that relief will be and when it will arrive.

The Fed is limited in how much direct support it can offer to struggling Americans, and it has already turned to available tools, including adjusting interest rates, lending to solvent businesses and buying up securities to help support the economy in a downturn.

What Happened at the July 2020 Fed Meeting

Federal funds rate remains at 0% to 0.25%

The Fed is unlikely to budge on the federal funds rate any time soon. In its July post-meeting statement, the FOMC stated again that it won’t make any changes until it is “confident that the economy has weathered recent events.”

Unfortunately, it may be some time before we meet that milestone. The Fed sees the economy’s future path as highly dependent on the course of the coronavirus pandemic and the measures the U.S. takes to combat it. While economic activity picked up in May as several cities reopened, such a move may have been premature and has resulted in further secondary closures and a slowdown in economic recovery.

The Fed extends its support facilities as continued boost

The Fed extended its series of credit facilities, originally set to expire on or around Sept. 30, 2020, through Dec. 31, 2020. These programs offered loans to both small and large businesses that were already on solid footing before the pandemic hit.

The Fed also extended its dollar swap line facilities through March 31, 2021. This program is geared toward restoring dollar funding markets around the world. While it has largely succeeded in this goal, this extension serves to help other countries’ central banks and simply to extend the life span of another helpful tool.

What does that all mean for me?

Whether you realize it or not, the Fed and its decisions are reflected in your everyday finances. Here’s how the Fed’s moves affect you and your money — and what you can do about it right now.

Open a high-yield savings account
With a 0% federal funds rate comes low deposit account rates. However, at many banks, low-yield accounts are the status quo even outside of a recession. Consider instead online high-yield savings accounts. Even in a low-rate climate, these accounts can give you the best return on your money.

Refinance your mortgage
Partly thanks to the Fed’s ongoing buyup of Treasury securities and mortgage-backed securities, mortgage rates are at historic lows. Do your finances a favor and refinance your mortgage to take advantage of these rates.

Pay down that credit card debt
Credit card rates are also benefiting from the low federal funds rate. If you can, consider a low-rate credit card balance transfer that can help you pay down your credit card debt more easily. Other borrowing rates are down, too, like for personal loans, which may offer the chance for refinancing or for others to more safely take on a low-rate loan.

What Happened at the June 2020 Fed Meeting

Federal funds rate remains at 0% to 0.25%

For now, anyway, we shouldn’t expect any change to the rate until the Committee is “confident that the economy has weathered recent events,” according to its post-meeting statement, and is in a better place to meet the Fed’s goals of maximum employment and price stability.

As for when that might be, the Fed still sees the ongoing public health crisis as posing “considerable risks to the economic outlook over the medium term.”

The federal funds rate isn’t expected to get a boost until after 2022. In the June Fed dot plot — which indicates each member’s future prediction of the federal funds rate’s midpoint — all Committee members said they expected the federal funds rate to stay put through 2021. Two members were more hopeful for 2022, with one dot placing its range expectation at 0.25% to 0.50% and one dot placing an expectation at 1.00% to 1.25%. Beyond 2022, Fed members plotted an expected fed funds rate between 2% and 3%.

Fed predicts a 6.5% decline in GDP in 2020

It’s been six months since the Fed made its usual quarterly economic projections (it quickly ditched its March projections in the wake of the coronavirus pandemic). So all eyes were on this month’s meeting, in which Fed members projected a 6.5% drop in the country’s GDP, inflation at 0.8% and the unemployment rate to settle around 9.3% by the year’s end.

This, of course, paints a dramatically different picture than the Fed presented at the end of last year, when it predicted 2% growth in GDP, 1.9% inflation and 3.5% unemployment.

The decline in GDP in the second quarter alone is expected to be the worst on record, according to Fed Chair Jerome Powell.

Despite the troubling numbers, the Fed’s outlook provides at least some hope that the economy will recover meaningfully by the year’s end. Pre-pandemic, the unemployment rate averaged 3.6% for a year before skyrocketing to 14.7% in April and coming in at 13.3% in May.

The Fed stopped short of promising a complete turnaround in a given time frame, but said the unemployment rate will decline to 6.5% in 2021, 5.5% in 2022 and 4.1% in the longer run past 2022.

Powell concedes that this outlook may be hopeful, but that it is too early to say whether negative effects will be felt for years to come. He notes that we could see “better results sooner” if there were more fiscal support, but that it’s up to Congress to decide.

As for inflation, decreased demand for consumer goods and significantly lower oil prices have caused inflation to run well below the Fed’s target of 2%. The Fed expects it to climb closer to its goal in 2021 (at 1.60%) and 2022 (at 1.70%).

Fed looks to include nonprofits in its loan offerings

While the Fed still has not yet rolled out its recently announced Main Street Lending Program, Powell announced that the Fed is looking into including nonprofit organizations for loan eligibility. Main Street will offer loans to small and medium-sized businesses that were already in “sound financial condition” before the pandemic hit.

In the meantime, the Fed will continue running its other credit facilities and purchasing assets, like Treasury securities and mortgage-backed securities (MBS). These measures are designed to help the markets continue to function as designed.

Powell stressed again that the Fed only has lending powers, not spending powers, and that it cannot grant money to businesses or individuals. That power lies with Congress through fiscal policy (which Powell stresses is needed), alongside the Fed’s full usage of its own tools, to better avoid unnecessary closures of small and medium-sized businesses and long-lasting damage to our economy.

What Happened at the April 2020 Fed Meeting

The FOMC left the federal funds rate unchanged at its April meeting. The federal funds rate range still stands at 0% to 0.25%, and will remain so for the foreseeable future.

“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the committee said in its statement. Keeping the rate at the zero bound in times of crisis raises asset prices and makes it easier to access money through lower loan rates, which consumers can then take advantage of to put money back into the economy.

The committee recognized that the coronavirus outbreak is causing “tremendous human and economic hardship” around the world, resulting in “sharp declines in economic activity and a surge in job losses,” as well as oil price drops and lower inflation. The outbreak will continue to “weigh heavily on economic activity, employment and inflation” in the short term and poses “considerable risks to the economic outlook over the medium term,” or in the next year or so — all in all, not the brightest outlook from the Fed.

The Fed did not announce any new emergency measures at its April meeting, but will continue using the tools it previously launched. Namely, the Fed will continue purchasing Treasury securities and agency residential and commercial mortgage-backed securities as needed to help foster smooth market functioning. These purchases have already helped market conditions “improve substantially in recent weeks,” prompting the Fed to slow its purchase pace, although continuing them nonetheless. The Open Market Desk will also continue to offer overnight and term repurchase agreement operations.

At the April meeting, FOMC Chair Jerome Powell reiterated the limits of the Fed’s tools and called for additional fiscal support. In his opening statement, Powell stressed that the Fed’s tools are “lending powers, and not spending powers,” and that the Fed can only operate under the authority granted by government policies. The Fed cannot issue grants, and can only lend to solvent businesses that are reasonably expected to repay the loans.

He recognized that unfortunately, this leaves out many potential beneficiaries. “[F]or many others, getting a loan that may be difficult to repay may not be the answer,” Powell said. “In these cases, direct fiscal support may be needed.” Deviating some from his typical avoidance of commenting on fiscal policy, he continued, “Elected officials have the power to tax and spend and to make decisions about where we, as a society, should direct our collective resources.”

Essentially, the Fed can only do so much with the tools Congress has given it — the responsibility of helping the economy’s most vulnerable players directly falls to Congress. “This direct support can make a critical difference, not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy,” Powell concluded. As for what that direct support should look like, Powell noted that policies that protect businesses from avoidable insolvency so they can hold onto their employees or rehire them would help reduce damage to the economy over the long run.

Powell also emphasized that now “is not the time” to worry about the federal deficit or to act on those concerns. Rather, it is the time to use the “great fiscal power of the U.S.” to actually help the American people and “try to get through this with as little damage to the longer run productive capacity of the economy.”

What happened at the March 23rd Emergency Fed Meeting

The FOMC gathered on Monday for a third emergency meeting amid the coronavirus outbreak to add to and amend its emergency measures. Per the committee’s statement, they are now moving toward “aggressive efforts” to continue battling what will certainly be “severe disruptions” to the U.S. economy due to the coronavirus pandemic.

The Fed has now committed to purchasing Treasury securities and agency mortgage-backed securities (MBS) “in the amounts needed” — a change from its previous purchase goal of at least $500 billion of Treasury securities and $200 billion of MBS. Purchases of agency commercial MBS are also included moving forward. These purchases are meant to refuel market liquidity and aid market functioning, which have been hampered by the effects of COVID-19. Now without any cap, the Fed is prepared to aid these markets as much as possible to stimulate the economy.

The Fed is also launching three new loan facilities designed to provide up to $300 billion in new financing and the Department of the Treasury, through the Exchange Stabilization Fund (ESF), will absorb up to $30 billion in losses for these facilities.

The Primary Market Corporate Credit Facility (PMCCF) will support new bond and loan issuance, and the Secondary Market Corporate Credit Facility (SMCCF) will provide liquidity for outstanding corporate bonds. Both facilities are meant to provide credit to large employers. The third facility is the Term Asset-Backed Securities Loan Facility (TALF), a tool previously used in the 2008 crisis, that is designed to support the flow of credit to consumers and businesses. The TALF enables the issuance of asset-backed securities, like those backed by student loans, auto loans and credit card loans.

To facilitate the flow of credit to municipalities, the Fed will also expand the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities and the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities to more than just banks. The Fed also decreased the pricing of the CPFF.

What happened at the March 15th Emergency Fed Meeting

In light of the current events, the emergency FOMC meeting on March 15 has replaced the committee’s previously scheduled meeting for March 17 and 18.

On March 15, the FOMC cut the federal funds rate by a full percentage point and launched a package of emergency measures the likes of which have not been seen since the financial crisis. The federal funds rate range now stands at 0% to 0.25%, putting it effectively at what’s known as the zero bound. This cut follows the Fed’s surprise rate cut on March 3, the first step in its emergency response to the coronavirus.

The Fed expects to keep rates at this level until they are “confident that the economy has weathered recent events” and is back on track to reach the Fed’s goals of price stability and maximum employment. Fed Chair Jerome Powell has said the FOMC will not look into negative interest rates as a response to the current crisis.

A main concern and main indicator of the times has been the stock market. The Fed’s emergency actions come at a time of immense turbulence in the stock market. The S&P 500 had dropped nearly 30% in the three weeks preceding the meeting, indicating evaporating investor confidence in the economic outlook and the government’s response to the outbreak. Massive sell-offs have even triggered several circuit-breakers, or pauses in open trading hours, to prevent a complete crash.

Note that all but one FOMC member voted in favor of this rate cut. Cleveland Federal Reserve President Loretta Mester would have preferred to cut the federal funds rate range to 0.50% to 0.75% at the meeting, but still supported all other actions taken by the Committee.

In a move equally if not more important as the rate cut, the FOMC relaunched quantitative easing to address the spreading economic crisis. The Fed announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of agency mortgage-backed securities (MBS) over the coming months. These purchases are designed to help restore smooth market functioning by increasing market liquidity, which has become strained in recent weeks. In turn, this is meant to create more accommodative financial conditions and support the rest of the economy. It is unclear how long exactly these actions will last, as Fed Chair Powell indicates it all depends on the path of the coronavirus and its effects.

The Fed also reduced the interest rate on discount window loans to 0.25% and will offer discount window loans for periods up to 90 days. The Fed also encourages banks to use the discount window to help provide credit to households and businesses.

Other actions the Fed took include reducing the pricing on dollar swap lines — in coordination with other countries’ central banks — which Powell assures carries “no risk to the Federal Reserve or to the American taxpayer,” eliminating reserve requirements for banks and encouraging banks to use intraday credit, their capital and liquidity buffers.

What about the economic outlook? Powell and the FOMC stress that the “economy came into this challenging period on a strong footing.” Unemployment was at 50-year lows, and both job gains and wage growth have been running at a solid pace. “U.S. banks are strong, have high levels of capital and liquidity and are well positioned to provide credit to households and businesses,” assured Powell in the FOMC’s March 15 statement.

Given the rescheduling of the routine March Fed meeting and the volatility of the current state of affairs, the FOMC will not release a Summary of Economic Projections (SEP) this month.

“A number of FOMC participants had already reached out to make the point that the economic outlook is evolving on a daily basis and it is depending heavily on the spread of the virus and the measures taken to affect it and how long that goes on,” Powell shared, adding that releasing an SEP in our current circumstance didn’t seem to be useful. “In fact, it could have been more of an obstacle to clear communication than a help.”

Powell expects the Fed to be back on their regular quarterly cycle again in June.

As for the outlook, the FOMC’s insight can only stretch so far. It is broadly expected that the second quarter will be a weak quarter, since output is declining and businesses are shuttering in major cities. But looking past the second quarter, it becomes harder to predict, as our economy is largely in the hands of the coronavirus and the path it takes.

Fed March 3rd, 2020 Emergency Rate Cut

In a surprise move on March 3, the FOMC cut the federal funds rate by half a percentage point, just two weeks before its regularly-scheduled March meeting. The federal funds rate range now stands at 1.00% to 1.25%.

The Fed’s emergency action follows a rocky period for the stock market. The S&P 500 dropped more than 11% in the final week of February, putting it briefly into correction, with stocks driven lower by burgeoning concerns about coronavirus and its impact on the global economy.

Markets rallied on the first trading day of March, on news that the global economic powers were discussing measures to blunt the coronavirus’s economic impact. The same morning the Fed took action, the G-7 released a statement noting that it would also take action to help the global economy meet the threat of coronavirus.

The Fed itself characterized the rate cut as directly related to the rapidly-spreading virus. “The fundamentals of the U.S. economy remain strong,” read the FOMC statement. “However, the coronavirus poses evolving risks to economic activity.”

The FOMC said it would continue to closely monitor the effects of the coronavirus, both domestically and internationally, and “act as appropriate to support the [U.S.] economy.” Typically, this language can indicate more rate actions should conditions not improve.

In a press conference on the morning of the emergency cut, Fed Chair Jerome Powell reiterated that the U.S. economy is strong, while also warning that coronavirus posed material risks to the economic outlook. “We saw a risk to the outlook for the economy and chose to act,” he said.

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Learn more: What is the Federal Open Market Committee?

The FOMC is one of two monetary policy-controlling bodies within the Federal Reserve. While the Fed’s Board of Governors oversees the discount rate and reserve requirements, the FOMC is responsible for open market operations, which are defined as the purchase and sale of securities by a central bank.

Most importantly, the committee controls the federal funds rate, which is the interest rate at which banks and credit unions can lend reserve balances to other banks and credit unions.

The committee has eight scheduled meetings each year, during which its members assess the current economic environment and make decisions about national monetary policy — including whether it will institute new rate hikes.

A look back at 2019

We’ve come a long way since December 2018, when the Fed delivered its fourth rate increase of that year, and the ninth in its campaign of rate hikes that began way back in December 2015. We saw a couple more rate increases in the first half of 2019 — the December 2018 SEP had projected a 2.9% federal funds rate projection for 2019. Obviously, that forecast did not age well.

Experts and markets alike were already wary of the December 2018 rate increase, convinced that a recession was just around the corner. Luckily, we’ve managed to avoid a recession, thanks in part to the Fed’s monetary policy moves, which have remained rather accommodating throughout the year.

That December 2018 hike would be the last one before a six-month monetary policy pause, ended by a historic 25-bps rate cut at July’s FOMC meeting. It was the first Fed policy easing since the depths of the Great Recession, more than a decade ago.

Fed Chair Powell acknowledged the ups and downs we’ve been through over the course of the past year. “Our views about the path of interest rates… changed significantly, as the economy faced some important challenges,” surprising challenges that he didn’t see coming, Powell said, citing weaker global growth and trade developments as those main hurdles. However, he is pleased that the Committee moved to support the economy throughout these challenges. “I think our moves will prove appropriate,” he said.

 

What happened at the December 2019 Fed meeting

As expected, the Fed left the federal funds rate untouched. The Federal Open Market Committee (FOMC) kept the federal funds target range at 1.50% to 1.75%. Notably, all voting members agreed with this direction, lending a definitive stance to the decision.

So it looks like we’re entering another rate pause period, as economic developments at home and abroad have not given the Fed any reasons for a “material reassessment” of its outlook. Recall the comments that Fed Chair Jerome Powell made at the October meeting, when he said the Committee would only change the direction of monetary policy if they could see any real reasons to do so in the economic outlook.

Overall, the Fed’s outlook for the U.S. economy remains positive, pointing to a strong labor market, solid job gains, low unemployment rate and solid consumer confidence. Despite continuing softness in exports and manufacturing and business fixed investment, the economy continues to grow at a moderate rate.

There were no surprises in the SEP, and few revisions to the projections released in September. The SEP forecasts for real GDP and personal consumption expenditure (PCE) inflation remained unchanged for the next three years. Notably, the Core PCE inflation projection was revised lower only slightly for 2019. Unemployment rate expectations are also down through the longer run, which aligns with the continued strength of the labor market.

The SEP downgraded its federal funds rate projection. By this forecast, we shouldn’t expect a rate hike until 2021. But, if 2019 has taught us anything, it’s that the tides of monetary policy can change very rapidly, altering both our economic expectations and our economic reality.

Speaking of fed funds rate projections, we got a new Fed dot plot. The Fed dot plot anonymously demonstrates each individual FOMC member’s own projection for the federal funds rate, shown as the midpoint of the target range or target level for the federal funds rate.

As it’s the end of the year, all members indicated a midpoint dot just above 1.5% for 2019. Most members chose to keep their dot there for 2020, with only four indicating a midpoint range just below 2%. Things start to look up in 2021, when eight members foresee a federal funds rate between 2% and 2.5%, while the other nine kept their dots below 2%. The outlook only continues to climb after that.

Our October Fed meeting predictions

There’s a chance the Fed will cut the federal funds rate again. The federal funds rate currently stands at 1.75% to 2.00%. If the Fed cuts rates in October, it will be the third cut in as many meetings. The two recent cuts — in July and September — were characterized by the Fed as protective measures, guarding against downside risks to the otherwise strong economy. These risks included constant global trade uncertainty and its byproduct, manufacturing decline.

Unfortunately, global trade negotiations remain rocky and manufacturing continues to display weak growth numbers. In September, U.S. manufacturing activity fell to a 10-year low, according to the Institute for Supply Management. In order to further support the economy, the Fed may have to execute another rate cut, many experts argue.

We should hear more about the state of the economy and the chance of recession. Talk of recession has hung over the economy since last December, although never truly manifesting as a real threat. Market watchers pointed to an inverted Treasury yield curve as a sure sign of recession, as an inversion has historically preceded a recession. However, the data supported the opposite: strong job growth, historically low unemployment rates and wage growth. In any case, the yield curve recently un-inverted.

The U.S. economy is in its 11th year of expansion, which the Fed seeks to support and maintain with its monetary policy choices. So keep an eye out for the Fed’s latest outlook.

What happened at the October Fed meeting

The FOMC has cut the federal funds rate at its third consecutive meeting. After cutting interest rates in July and September, the Federal Open Market Committee (FOMC) has lowered the federal funds rate range by 25 basis points to 1.50% to 1.75%. As with the previous two reductions, the committee says this easing is meant to provide “significant support” to the U.S. economy against downside risks. These include muted inflation pressures, the ongoing trade battle with China, slower global growth and weaker U.S. manufacturing due to global uncertainties.

Does this mean the Fed will continue to cut rates? Fed Chair Jerome Powell is always quick to state that the Fed’s decisions are driven by the economy’s performance, noting at the post-meeting press conference that “policy is not on a preset course.” He said the economy’s current growth rate and continuing resiliency would not indicate another necessary rate cut. Of course, he also stressed that any changes to this state of affairs could prompt the Fed to ”materially reassess” its outlook, although he never shares what he thinks those changes might look like.

For what it’s worth, the FOMC again did not deliver a unanimous decision to cut rates. Kansas City Fed President Esther George and Boston Fed President Eric Rosengren voted to maintain the target range at 1.75% to 2.00%.

The downside risks to the U.S. economy remain, but it continues to perform well on its own. The Fed’s October meeting statement began by outlining the state of the economy. On the upside, the statement indicated that the labor market remains strong, the economy is growing at a moderate rate, job gains are solid, unemployment is low and household spending growth is strong. The weaker data points include low inflation, weaker business fixed investments and exports and slower manufacturing.

On the whole, the data continues to point to a growing, stable economy, in its 11th year of expansion. The committee itself said it expects the economy to keep expanding at a moderate rate.

Our September Fed meeting predictions

It certainly looks like the Fed may cut rates again at its September meeting. The 25 basis point (bp) cut in July — the first in over a decade — reduced the federal funds rate to 2.00% to 2.25%, and the Federal Open Market Committee (FOMC) justified its move by saying it wanted to protect against “downside risks,” namely weak global growth and rocky trade policy negotiations. Due to the persistence of these risks in the interim, markets and economic experts are preparing for yet another 25 bps cut later this month, which would put the federal funds rate at 1.75% to 2.00%.

After the July meeting, Fed Chair Jerome Powell stated that he and the FOMC did not see the historic rate reduction as the first in a string of cuts. However, Powell spoke at the University of Zurich on Sept. 6, right before the FOMC’s pre-meeting silent period, and stated that the committee would “continue to act as appropriate” to protect the U.S. economy. The risks cited in July have not abated in September, so many have concluded it’s not too far-out to assume this signals another rate cut.

Economist and Fed-watcher Tim Duy agrees — and he thinks the cuts won’t end in September, either. “The Fed will cut rates 25bp next week and leave the door open for more,” he wrote.

We’ll get a look at the Fed’s newest Summary of Economic Projections this month. Every other Fed meeting brings the release of the Summary of Economic Projections (SEP), which outlines each committee member’s outlook for the U.S. economy over the next couple of years and the longer term. These forecasts include GDP growth, inflation, unemployment and the federal funds rate. The SEP gives us a relative idea of what to expect from the economy in the future.

Relatedly, Powell should once again stress that we’re not on the verge of recession. While speaking in Zurich, Powell assured that the Fed’s “main expectation is not at all that there will be a recession.” He points to the U.S. economy’s continued expansion — “moderate growth, a strong labor market” and inflation, although muted, hovering around the 2% goal. He also reminded us that we’re now in the 11th year of an economic expansion. It is expected that Powell will use the post-meeting press conference, as he has done before, to address and dispel recession concerns.

That said, recession concerns aren’t entirely unfounded. Overall growth has slowed from its speedy pace in 2018, and the latest jobs report showed fewer new jobs in August. Further, the Treasury yield curve — a tool used to look at the future direction of interest rates and broader economic trends — has inverted recently. This phenomenon — where long-term Treasury interest rates fall below short-term Treasury rates — has historically indicated an upcoming recession. A yield curve inversion like this shows that markets are predicting lower rates in the future. However, there’s certainly room for prediction error; the curve inverted once before this year and it was not followed by an immediate recession.

What happened at the September Fed meeting

The Federal Open Market Committee (FOMC) cut the federal funds rate, as expected. Fed funds took another 25 basis point tumble to 1.75% to 2.00%, and the committee once again cited “implications of global developments” and “muted inflation pressures” as the causes.

If you recall, this reduction seems to contradict Fed Chair Jerome Powell’s remarks back in July, when he was emphatic that July’s cut — the first in over a decade — was not the opening shot in a campaign of many reductions. Rather, he referred to it more as a “mid-cycle adjustment” and a protective response due to a few “downside risks” (weak global growth and trade uncertainties) to the otherwise strong economy.

As with the July meeting, there were dissenters on the committee. Kansas City Fed President Esther George and Boston Fed President Eric Rosengren, who had both voted against the July rate change, preferred to maintain the 2.00% to 2.25% range. St. Louis Fed President James Bullard also voted against the decision, although he really wanted a bigger, 50 basis point cut.

Chair Powell and the Fed’s Summary of Economic Projections (SEP) indicate a continued positive outlook for the U.S. economy. The Fed continues to acknowledge that the U.S. economy itself is still doing just fine; as Powell stated at today’s press conference, “we continue to see sustained expansion.”

“This has been our outlook for quite some time,” he added, despite significant changes in their views on the appropriate path of interest rates.

More specifically, the FOMC’s statement points to the continued strength of the labor market, moderate growth in economic activity, solid job gains, a low unemployment rate and strong household spending growth. The only downside seems to be weakened business fixed investment and exports — both of which can be explained by the ongoing trade conflict.

The SEP indicates that committee members now predict an infinitesimal increase in both the real GDP and the unemployment rate for 2019. The personal consumption expenditure (PCE) and Core PCE inflation projections remain unchanged from the June SEP — so inflation continues to be a non-event. Their future predictions for 2020 to 2022 and the longer run also remain relatively unchanged.

The Fed dot plot — which anonymously indicates each member’s federal funds rate prediction — shows a much lower and more cohesive outlook for 2019 when compared to June’s SEP. Undoubtedly as a result of rate cut double header, there are more low-rate predictions through 2022. The majority indicate a federal funds rate below 2% for this year and next year.

So how about that recession? The past few months have been clouded by a certain cognitive dissonance: The Fed’s positive economic outlook on one hand, and the public’s seeming obsession with an imminent recession on the other. If you were to look at just the data, you’d see an economy performing well. Of course, there’s more to it than that, as risks keep emerging and causing softness here and there.

Still, the “most likely case is continued moderate growth,” a widely shared projection among forecasters, according to Powell. And the reason for the continued positive outlook, Powell added, is the committee’s dedication to its mandates: “Our shifting to a more accommodative stance over the course of the year has been one of the reasons why the outlook has remained favorable.”

As for continued worries about the inverted treasury yield curve, Powell admitted that while the Fed certainly monitors the yield curve carefully, “there’s no one thing” that you can point to that undoubtedly means recession. Rather, Powell suggested, the inverted curve may be a result of the very risks the rate cut is intended to protect against.

“We don’t see a recession, we’re not forecasting a recession, but we are adjusting monetary policy in a more accommodative direction to try to support what is, in fact, a favorable outlook.”

Our July Fed meeting predictions

Chances of a rate cut at the July meeting are way up. Committee Chair Powell all but confirmed the possibility in his recent testimony before Congress. “Since the June meeting, and even for a period before that, the data have continued to disappoint,” he said. As the Fed relies on jobs, manufacturing and wage data to help inform their policy decisions, disappointing data like what we’ve been seeing, provides a real justification of a rate cut.

However, the cut shouldn’t be anything more than 25 basis points. “The data doesn’t support a 50bp move,” maintains economist Tim Duy. Growth has certainly slowed in 2019, but June’s job reports provided a positive surprise, while wage growth still weakened.

Experts speculate that if the Fed does not cut rates this month, they will signal a rate cut to come in September instead. For one, Boston Federal Reserve President Eric Rosengren has vocalized that he thinks the economy is “quite strong” at the moment and doesn’t quite yet need Fed policy interference. Whether the rest of the FOMC agrees with him or not will be revealed next week.

We’ll hear more about the economy’s future as talk of an impending recession continues. Speculation about an upcoming recession has held steady since December 2018, when the Fed downgraded their economic outlook. Since then, growth has continued to slow, although a few positive surprises along the way have buoyed sentiment.

One recession indicator will be very clear if the Fed actually holds off on a rate cut this month. “Without a rate cut, the markets may consider the odds of a more significant slowdown as increasing,” said Ken Tumin, founder of DepositAccounts.com, another LendingTree-owned site. One interpretation of the Fed not cutting rates yet would be a need to maintain an insurance policy against an impending economic slowdown. “Keep your powder dry” is a common saying, and no cut may mean the Fed wants to reserve it’s finite rate cutting policy tools to fight a recession later.

What happened at the July Fed meeting

The Federal Reserve cut the federal funds rate by 25 basis points. After a six-month monetary policy pause, the Federal Open Market Committee (FOMC) has lowered the federal funds rate by 25 basis points to a range of 2.00% to 2.25%, a choice it maintains is “appropriate to sustain the expansion” of the economy.

The FOMC statement cites “implications of global developments” (such as trade conflict and Brexit) and “muted inflation pressures” as its chief reasons for the rate cut, also calling out softer growth in U.S. business fixed investment. On the other hand, the committee acknowledged the still-favorable parts of the U.S. economy, including the strong labor market, low unemployment and increased household spending.

At the press conference, Fed Chair Jerome Powell underscored these good bits, stressing that “nothing in the U.S. economy that present a prominent, near-term threat,” while very pointedly calling out global risks, warning that the implications of these risks weigh heavily on the FOMC’s thinking.

As to whether these points signal more rate cuts, Powell was adamant that they do not. In reference to previous instances where mid-cycle rate cuts have evolved into rate cutting cycles, Powell said that “the Committee is not seeing that,” adding “that’s not our perspective … or outlook.”

The Fed maintained a positive outlook for the U.S. economy. Despite slower growth, the US economy has continued to grow, and Chair Powell made sure to emphasize the point in his press conference. “The Committee still maintains a favorable baseline outlook,” he said, continuing to stress the issue throughout.

Powell begs us not to take the rate cut as a signal of panic at the Fed. If you remember, Boston Federal Reserve President Eric Rosengren spoke on July 19 about his preference to wait to make any rate changes, “given that the economy is quite strong” and with inflation holding around 2%. In fact, Rosengren and Kansas City Fed President Esther L. George were the two dissenters at the July meeting. Both indicated their preference to keep rates unchanged.

At the press conference, Powell doubled down on the rate cut as a safeguard from downside risks. He identified three threats the rate cut would protect against. First, weak global growth, namely in Europe and China. Secondly, weak domestic manufacturing. Third — a byproduct of risks one and two — is stubbornly muted inflation growth.

For some, however, the Fed rate cut is hardly justified, or is merely a fig leaf.

Ahead of the July meeting, University of Oregon economist Tim Duy proclaimed that “the December rate hike was simply a small mistake than needed to be rectified,” and he remained as emphatically critical in its wake. “All policy makers really know at this point is that they are navigating a mid-cycle course correction,” he wrote in Bloomberg.

The Fed’s reassurances of a positive economic outlook suggest a recession remains a distant threat, at best. We’ve seen consistent growth throughout this year, albeit at a slower pace than 2018. Plus, the Fed continues to keep a positive outlook for the U.S. economy. Any threats that are perceived now are the target of today’s rate cut, designed to continue the growth we’ve been seeing.

When asked about how cutting rates today would give the Fed little wiggle room to cut again when a recession hits, Powell was quick to shut down any assumption that one was impending. “In other cycles, the Fed wound up raising rates again after a mid-cycle adjustment,” he countered, quickly adding, however, that “I’m not predicting that.” Still, he leaves it open to the possibility of future rate hikes after this cut, rather than an overall downward turn.

Our June Fed meeting predictions

The Fed could signal a possible future rate cut. Chair Jerome Powell recently indicated the Fed’s willingness to cut rates, if necessary, in response to a bad outcome in trade negotiations, or data pointing to a weakening economy. This was the first time Powell had hinted at the possibility of monetary policy changes since the Fed chose to put an end to its rate hike streak back in January.

Economist Tim Duy points to the May jobs report, especially revisions to the prior months’ data, as another trigger for the Federal Open Market Committee (FOMC) to foreshadow a possible rate cut. Job gains slowed in May, due to softer economic growth rather than a lack of workers. But Duy warns that the revisions indicate U.S. job growth has “slowed markedly” over the last four months, another worrying sign.

Note that there is practically zero chance of a rate cut at the upcoming June meeting. Instead, you should look for hints to a rate cut later in 2019. “I don’t think they’ll change the rate,” says Tendayi Kapfidze, chief economist at LendingTree. “Definitely not at this meeting. I’d be surprised if it happens before September.”

The Fed could soften their economic forecast. The June Fed meeting will bring the latest Summary of Economic Projections (SEP). Much like it sounds, this is where the FOMC updates their long-term forecast for economic performance over the next few years.

Kapfidze predicts we’ll see another downgraded SEP forecast. “I think they’ll come up with a softer forecast. It’s just a question of how soft,” he said. With the data coming in somewhat mixed and trade negotiations remaining highly unpredictable, Kapfidze said the Fed finds itself in a “delicate moment to get the pulse of the state of the economy.”

We should learn more about the Fed’s approach to their 2% inflation goal. At the April/May meeting, we learned that inflation for personal consumption expenditures — the Fed’s preferred measure of price changes — fell unexpectedly. This left many economists and experts concerned that the Fed was neglecting its mandate to keep inflation symmetrically around 2%.

“Perhaps inflation is not coming back as they anticipated,” Kapfidze muses. So while inflation is stable right now, it’s definitely still a concern.

What happened at the June Fed meeting

The Fed kept the federal funds rate steady… for now. The federal funds rate was left at 2.25% to 2.50%, as the Fed continues its rate pause. The Fed changed its tone by dropping its “patient stance” language, saying instead that it would “closely monitor the implications” given the “uncertainties about this outlook,” namely trade developments and global growth concerns.

In simpler terms, the FOMC felt the current data didn’t support a case for cutting rates right now. However, it does expect the economic climate to change in the next few months – possibly for the worse.

“The Committee wanted to see more [before making any changes],” said Fed Chair Jerome Powell at the post-meeting press conference. “I expect a full range of data, and that something will change before the next meeting.” Essentially, as these “uncertainties” become clearer, the Fed will adjust policy accordingly.

The dovish St. Louis Fed President James Bullard was the only dissenter to the policy decision, voting to lower the federal funds rate range by 25 basis points, while all others voted to maintain rates where they are.

A rate cut at the next meeting is by no means an inevitable conclusion. Most experts expected the Fed to signal that a rate cut was imminent. We didn’t get that strong of a sign.

The Fed’s latest Summary of Economic Projections (SEP) predicts no rate changes until 2020, keeping the projection for 2019 within the current range at 2.4%. The 2020 projection, however, dropped to 2.1%, which lies below the current lower limit of the rate range. It’s also well below the previous March projection for 2020 of 2.6%.

Still, Tendayi Kapfidze, chief economist at LendingTree, points to three signs that a rate cut is coming. “For one, at least eight Fed members projected a cut before the end of the year,” he shares. “Two, we saw one member already voting for a cut at this meeting. Three, the Fed removed the word ‘patient’ in their statement, instead calling out the uncertainties and risks.”

As for when the Fed might reduce rates, Kapfidze thinks the next Fed meeting in July is still too soon. “Perhaps September is more realistic.”

The SEP was stronger than expected. The Fed’s economic projections were little changed from its March outlook, again contradicting expert predictions of a softer outlook. Change in real GDP and the federal funds rate projections for 2019 matched the numbers in March, while the unemployment rate projection dropped by a single basis point for 2019.

In its statement, the FOMC points to strong labor market reports, low unemployment, higher household spending and overall moderate economic growth as support for a continued favorable baseline outlook.

That tricky problem with inflation remains. If you recall from last month’s meeting, inflation was the hot topic as the Fed was concerned about inflation continuing to fall short of its goal of 2%. This time around, the Fed again acknowledged that overall inflation and inflation for items other than food and energy are running below 2%.

Chair Powell shared that the Committee points to uncertainties in global growth and trade negotiations as factors for muted inflation. Plus, the SEP gives us some additional insight, showing us that the Fed expects inflation to continue to run below target.

Still, Powell reiterated the Committee’s firm commitment to its inflation objective. He also stated that while inflation continues to run below target, the Committee expects it to pick back up thanks to solid growth and a strong job market, although “at a slower pace than had been expected.”

Our April/May Fed meeting predictions

The Fed should reaffirm their patient stance at the April 30/May 1 meeting, and may reiterate their view that stronger U.S. economic data is needed before they can make more policy changes. The Fed already said as much in its March meeting minutes, where it confirmed that “a majority of participants” agreed to leave “the target range unchanged for the remainder of the year,” due to the unsettled economic outlook. When considering rate changes, the Fed looks at job growth, wages, and inflation pressures; if the numbers meet the Fed’s parameters, rates stay unchanged, but if they are too hot or too cold, rates need to change. Inflation has been hovering around the Fed’s target of about 2%, and while both job growth and retail sales were points of concern due to low numbers since December, both measures have recovered somewhat in March economic data reports.

Without drastic changes to the data, there is little risk the Fed will be moving rates up (or down). As economist Tim Duy succinctly told MagnifyMoney, “We will not see a rate cut. I don’t think we will see much change in policy at all. It should be a boring meeting.”

About that economic outlook! Even if the Fed stays on pause, it seems like the latest data should tamp down talk of an upcoming recession. We’ve been hearing analysts and commentators talk about a possible recession since December, when the data showed a decline in economic indicators across the board. The cynicism really started to kick in when the Treasury yield curve began to invert, which can be (but isn’t always) a harbinger of recession. However, the stronger March jobs, retail and new home sales reports have lessened such concerns. Plus, the latest GDP report from the Bureau of Economic Analysis shows growth at an annual rate of 3.2% in the first quarter of 2019, exceeding economists’ predictions of 2.5% growth.

Tendayi Kapfidze, lead economist at LendingTree, said as much back in March ahead of that month’s Fed meeting: “Since the financial crisis, data in the first quarter has been coming in weak because of seasonal adjustment. Models that make this adjustment are skewed by this, but then everything can reaccelerate in following quarters.” Plus, on top of that adjustment, the government shutdown greatly affected reports in both their results and how they were measured.

On the whole, we’re still seeing an economy on the rise, not a decline — it’s just not growing quite as fast as it was in 2018.

What happened at the April/May Fed meeting

The Fed maintained their patient policy stance. The Fed left rates unchanged at 2.25% to 2.50%. The latest economic data has indicated some recovery in jobs and retail sales growth, while the unemployment rate remains low, as well. Plus, GDP grew 3.2% in the first quarter, exceeding expert economists’ predictions of 2.5%. This data supports the Fed’s outlook for a growing economy and its decision to keep interest rates unchanged.

What about the Fed’s inflation goal? This was the big question for Fed Chair Jerome Powell at his press conference following the FOMC meeting. Inflation for personal consumption expenditures — the Fed’s preferred measure of price changes — has been dropping for the past three months, with the first quarter coming in at 0.7%, below the committee’s 2% target. Powell did note that inflation “unexpectedly fell,” standing at 1.6% for the previous 12 months ending in March.

When asked about what signs the FOMC might see as a need to take action, Powell first answered, “We are strongly committed to our 2% inflation objective, and to achieving it on a sustained and symmetric basis,” a point he reiterated throughout the conference. “The Committee would be concerned if inflation were running persistently above or below 2%” he continued, also noting that what they are currently seeing does not indicate a persistent problem.

While policy remains on hold for now, economist Tim Duy has indicated that weak inflation numbers should still push the Fed to cut rates before the end of the year — “If the Fed is serious about the inflation target, then the odds favor a rate cut over a rate hike,” he writes. Given Powell’s reassurance of the Fed’s strong commitment to its inflation goal, a rate cut could certainly be in the near future.

Our March Fed meeting predictions

There’s little chance of a rate hike this time around. In a policy speech on March 8, Fed Chair Jerome Powell reinforced the FOMC’s patient approach when considering any changes to the current policy, indicating he saw “nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures.”

This is no different from what we heard back in January, when the Fed took a breather after its December rate hike. There was no change to the federal funds rate at that meeting, and Powell had stressed that the FOMC would be exercising patience throughout 2019, waiting for signs of risk from economic data before making any further policy changes.

Further strengthening the case for rates on hold, the reliably hawkish Boston Fed President Eric Rosengren cited several reasons that “justify a pause in the recent monetary tightening cycle,” in a policy speech on March 5. His big tell was citing the lack of immediate signs of strengthening inflation, which remains around the Fed’s target rate of 2%.

Even though there had been some speculation of a first quarter hike at the March Fed meeting, LendingTree chief economist Tendayi Kapfidze reminds us that the Fed remains, as ever, data-dependent. “The latest data has been on the weaker side, with the exception of wage inflation,” he says.

The economic forecast may be weaker than December’s. The Fed will release their longer-range economic predictions after the March meeting. These projections should include adjustments in the outlook for GDP, unemployment and inflation. The Fed will also provide its forecast for future federal funds rates.

Kapfidze expects we’ll see a weaker forecast this time around than what we saw in December. “I except the GDP forecast to go down, and the federal funds rate expectations to go down.” This follows a December report that posted lower numbers than the September projections.

Despite flagging economic projections, Rosengren offered a steady outlook in his speech. “My view is that the most likely outcome for 2019 is relatively healthy U.S. economic growth,” he said, again attributing this to “inflation very close to Fed policymakers’ 2 percent target and a U.S. labor market that continues to tighten somewhat.”

The Fed’s economic predictions offer clues to its future policy decisions. In September, the Fed projected a 2019 federal funds rate of 3.1%. That number dropped to 2.9% in the December report. With the current rate at 2.25% to 2.5%, there’s still room for more hikes this year. Keep in mind, however, that, the March meeting may narrow projections for the rest of 2019.

As for Kapfidze, he thinks we’ll see a rate hike in the second half of the year. “If wage inflation continues to increase and it trickles more into the economy, the Fed could choose to raise rates due to that risk.”

However, as of March 12, markets see the odds of a rate hike this year at zero, while the odds of a federal funds cut has risen to around 20%, based the Fed Fund futures.

What happened at the March Fed meeting

The Federal Reserve signaled no rate hikes this year, and the possibility of only one increase in 2020. The Fed has pivoted pretty rapidly from its hawkish stance in 2018 to a more dovish outlook as it puts policy on ice. This change in tone grows directly from the FOMC’s observation of slowing growth in economic activity, namely household spending and business investment. The Fed also noted that employment gains have plateaued along with the unemployment rate, which nevertheless remains at very low levels.

So the federal funds rate looks to remain at 2.25% to 2.50% for a year or more, and the FOMC highlighted that this is the not-too-hot, not-too-cold level that for now best serves its dual mandate to “foster maximum employment and price stability.”

The Fed also released its Summary of Economic Projections (SEP). The March SEP indicated a median projected federal funds rate of 2.6% for 2020, which is why everybody is discussing the possibility of at least one, small increase next year.

For those who were really hoping for at least one more rate hike, all is not lost — Tendayi Kapfidze, LendingTree chief economist, believes we shouldn’t take March’s decision too gravely. “There are special factors that suggest the economy could reaccelerate,” he says. “The government shutdown threw a wrench into things, slowing some activity and distorting how we measure the economy.” He also remarks that since the financial crisis, data in the first quarter has continued to come in weak, still leaving room for everything to reaccelerate in the second and third quarters. He points to the already strong labor market as a plus.

Fed economic forecasts hint at a possible rate cut by the end of 2019. Just as the Fed projects a slightly higher federal funds rate in 2020, it also posted a projected 2.4% for 2019. Note that this projected rate falls below the upper end of the current rate corridor of 2.5%. This means the doves may want to see a possible rate cut if improvements in the economic outlook don’t materialize by mid-year.

When asked about this potential rate cut, Fed Chair Jerome Powell emphasized the Committee’s current positive outlook, while also emphasizing that it remains mindful of potential risks. Still, he maintained that “the data are not currently sending a signal that we need to move in one direction or another.” He also remarked that since it’s still early in the year, they have limited and mixed data to consult.

Kapfidze offers a more concretely positive outlook, noting that the chances of a rate cut are pretty slim. “To get a rate cut, you’d have to have sustained growth below 2%. There would have to be further weakness in the economy, like if trade deals get messier, to warrant a rate cut.”

The Fed downgraded its economic outlook for 2019 for the second time in recent months. In line with Kapfidze’s predictions, we did see a weaker economic outlook coming out of this month’s Fed meeting. The median GDP forecast for 2019 and 2020 decreased from December projections, while it remained the same for 2021 and beyond. This comes hand in hand with the decreased fed funds rate projections.

The FOMC increased their unemployment projections, which Kapfidze found surprising because the labor market has been so strong. “Maybe they believe that those numbers indicate a deceleration,” he said, “but really, it has to be consistent considering the other changes that they made.”

Why the Fed March meeting is important for you

It’s easy to let all of this monetary policy talk go in one ear and out the other. But what the Fed does or doesn’t change has an impact on your daily life. Without a rate hike since December, we’re already starting to see mortgage rates fall. This is helpful not only for those who want to buy a home, but also for those who bought homes at last year’s highs to refinance.

As for personal loans and credit cards, we may still see these rates continue to increase, just at a slower rate. These rates have little chance of decreasing because lenders may take the current weaker economic data as a sign that the economy is going to be more risky.

Deposit accounts will feel the opposite effects as banks may start to cut savings account rates. At best, banks will keep their rates where they are for now, until more evidence for a rate cut arises.

Our January Fed meeting predictions

Don’t expect a rate hike. The FOMC ended the year with yet another rate hike, raising the federal funds rate from 2.25 to 2.5%. It was the committee’s fourth increase of 2018, which began with a rate of just 1.5%.

But the January Fed meeting will likely be an increase-free one. Tendayi Kapfidze, chief economist at LendingTree, the parent company of MagnifyMoney, said the probability of a rate hike is “basically zero.”

Kapfidze’s assessment is twofold. First, he noted that the Fed typically announces rate increases during the third month of each quarter, not the first. This means a hike announcement would be much more likely during the FOMC’s March 19-20 meeting, rather than in January.

Perhaps more importantly, Kapfidze said there’s been too much market flux for the FOMC to make a new decision on the federal funds rate. He predicts the Fed will likely wait for more evidence before it considers another rate hike.

“I think a lot of it is a reaction to market volatility, and therefore that’s lowered the expectations for federal fund hikes,” Kapfidze said.

But if a rate hike is so unlikely, what should consumers expect from the January Fed meeting? Here are three things to keep an eye on.

#1 The frequency of rate hikes moving forward

It’s unclear when the next increase will occur, but the FOMC’s post-meeting statement could give a clearer picture of how often rate hikes might occur in the future.

The Fed released its latest economic projections last month, which predicted the federal funds rate would likely reach 2.9% by the end of 2019. This figure was a decline from its September 2018 projections, which placed that figure at 3.1%.

As a result, many analysts — Kapfidze included — are forecasting a slower year for rate hikes than in 2018. Kapfdize said some analysts are predicting zero increases, or even a rate decrease, but he believes that may be too conservative.

“I still think the underlying economic data supports at least two rate hikes, maybe even three,” Kapfidze said.

Kapfidze’s outlook falls more in line with the Fed’s current projections, as it would mean two rate hikes of 0.25% at some point this year. There could be more clarity after the January meeting, as the FOMC’s accompanying statement will help indicate whether the Fed’s monetary policy has changed since December.

#2 An economic forecast for 2019

The FOMC’s post-meeting statement always includes a brief assessment of the economy, and this month’s comments will provide a helpful first look at the outlook for 2019.

Consumers will have to wait until March for the Fed’s full projections — those are only updated after every other meeting — but the FOMC will follow its January gathering with its usual press release. This statement normally provides insight into the state of household spending, inflation, the unemployment rate and GDP growth, as well as a prediction of how quickly the economy will grow in the coming months.

At last month’s Fed meeting, the committee found that household spending was continuing to increase, unemployment was remaining low and overall inflation remained near 2%. Kapfidze expects January’s forecast to be fairly similar, as recent market fluctuations might make it difficult for the FOMC to predict any major changes.

Read more: What the Fed Rate Hike Means for Your Investments

“I wouldn’t expect any significant change in the tone compared to December,” Kapfidze said. “I think they’ll want to see a little more data come in, and a little more time pass.”

At the very least, the statement will let consumers know if the Fed is taking a patient approach to its analysis, a decision that may help indicate just how volatile the FOMC considers the economy to be.

#3 A response to the government shutdown

The big mystery entering January’s Fed meeting is the partial government shutdown. While Kapfidze said the FOMC’s outlook should be similar to December, he also warned that things could change quickly if Congress and President Trump can’t agree on a spending bill soon.

“The longer it goes on, and the more contentious it gets, the less confidence consumers have — the less confidence business have. And a lot of that could translate to increased financial market volatility,” Kapfidze said.

Kapfidze added that the longer the government stays closed, the more likely the FOMC is to react with a change in monetary policy. During the October 2013 shutdown, for example, the Fed’s Board of Governors released a statement encouraging banks and credit unions to allow consumers a chance at renegotiating debt payments, such as mortgages, student loans and credit cards.

“The agencies encourage financial institutions to consider prudent workout arrangements that increase the potential for creditworthy borrowers to meet their obligations,” the 2013 statement said.

What happened at the January Fed meeting:

No rate hike for now

In its first meeting of 2019, the Federal Open Market Committee announced it was keeping the federal fund rate at 2.25% to 2.5%, therefore not raising the rates, as widely predicted. This decision follows much speculation surrounding the economy after the Fed rate hike in December 2018, which was the fourth rate hike last year. In its press release, the FOMC cited the near-ideal inflation rate of 2%, strong job growth and low unemployment as reasons for leaving the rate unchanged.

In the post-meeting press conference, Federal Reserve Chairman Jerome Powell confirmed that the committee feels that its current policy is appropriate and will adopt a “wait-and-see approach” in regards to future policy changes.

Read more: How Fed Rate Hikes Change Borrowing and Savings Rates

Impact of government shutdown is yet to be seen

The FOMC’s official statement did not address the government shutdown in detail, although it was discussed briefly in the press conference that followed. Powell said he believes that any GDP lost due to the shutdown will be regained in the second quarter, providing there isn’t another shutdown. Any permanent effect would come from another shutdown, but he did not answer how a shutdown might change future policy.

What the January meeting bodes for the rest of the year

Don’t expect more rate hikes. As for what this decision might signal for the future, Powell maintains that the committee is “data dependent”. This data includes labor market conditions, inflation pressures and expectations and price stability. He stressed that they will remain patient while continuing to look at financial developments both abroad and at home. These factors will help determine when a rate adjustment would be appropriate, if at all. When asked whether a rate change would mean an increase or a decrease, he emphasized again the use of this data for clarification on any changes. Still, the Fed did predict in December that the federal funds rate could reach 2.9% by the end of this year, indicating a positive change rather than a negative one.

CD’s might start looking better. For conservative savers wondering whether or not it’s worth it to tie up funds in CDs and risk missing out on future rate hikes – long-term CDs are looking like a safer and safer bet, according to Ken Tumin, founder of DepositAccounts.com, another LendingTree-owned site. Post-Fed meeting, Tumin wrote in his outlook, “I can’t say for sure, but it’s beginning to look more likely that we have already passed the rate peak of this cycle. It may be time to start moving money into long-term CDs.”

Look out for March. Depending on who you ask, the FOMC’s inaction was to be expected. As Tendayi Kapfidze, LendingTree’s chief economist, noted [below], if there is going to be a rate increase this quarter, it will be announced in the FOMC’s March meeting. We will also have to wait for the March meeting to get the Fed’s full economic projections. For now, its statement confirms that household spending is still on an incline, inflation remains under control and unemployment is low. It also notes that growth of business fixed investment has slowed down from last year. As for inflation, market-based measures have decreased in recent months, but survey-based measures of longer-term inflation expectations haven’t changed much.

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Editors’ Choice: Best Checking Accounts for September 2021

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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The best checking accounts can provide a competitive interest rate, ATM fee reimbursements and even cashback rewards. If your current account doesn’t offer any of these features, it may be time to switch.

Why trust us?

At MagnifyMoney, it’s our mission to inform our readers about the best financial opportunities out there. Our insights have been cited by top financial publications including MarketWatch, CNBC and the Wall Street Journal.

Our dedicated team of financial experts spent dozens of hours grading each checking account on its features, including fees, minimum balance requirements, ATM and branch network availability, APYs and customer satisfaction. We distilled our picks from a list that included hundreds of banks, credit unions and online institutions nationwide.

We ensure our list is updated every month as new banks are added to our database, and we update information as banks change their terms. Check out our best checking account picks for September 2021 and click on the links in the table below to read about why we picked each one.

Best checking accounts of September 2021

Best overall checking account: Paramount Bank Interest Checking

Interest Checking

SEE DETAILS Secured

on Paramount Bank (MO)’s secure website

NCUA Insured

Highlights:

  • High APY available on accounts up to $99,999.99
  • No ATM fees, and up to 20 reimbursements per month for third-party fees
  • Easily waivable $3 monthly fee
  • APY: Up to 0.30%
  • Maintenance fee: $3
  • Current promotion: N/A
Why we picked it: Paramount Bank offers a standout APY on its Interest Checking Account. Balances up to $99,999.99 earn 0.30% APY, while balances of $100,000.00 or more earn an APY of 0.10%, which is still above-average in the current rate environment.

Beyond its impressive rates, Paramount’s Interest Checking is also notable for not charging ATM fees — plus, Paramount will refund up to 20 third-party ATM fees per month. The account comes with a free Visa Debit Card, and you can manage your account using the Paramount Bank app, as well as through a limited number of branch locations throughout the country.

What to watch out for: You’ll need to make a deposit of at least $100 to open the account. In addition, there’s a monthly fee, though it’s only $3 and is waivable by maintaining an account balance of just $1.

How we picked our best overall checking account: Our pick for best overall checking account had to have the characteristics that we favored for any checking account that made this list: a competitive APY, low or no minimum balance requirements and minimal monthly service fees or ATM fees (or ATM fee reimbursements). To be considered for the best overall checking account, however, an account had to check off these more specific, stringent requirements:

  • An APY that exceeds the current national average APY for checking accounts
  • No conditions necessary to meet advertised APY
  • Access to either over 40,000 ATMs nationwide or ATM fee rebates
  • A monthly maintenance fee below $10
  • An option for a savings account at the bank

Best high-yield checking account: Consumers Credit Union Rewards Checking

Rewards Checking - Tier A

SEE DETAILS Secured

on Consumers Credit Union (IL)’s secure website

NCUA Insured

Highlights:

  • Access to over 30,000 ATMs
  • Most lucrative rates require minimum direct deposits or spend on CCU Visa credit card
  • APY: Up to 4.09%
  • Maintenance fee: $0
  • Current promotions: N/A

Read the full review

Why we picked it: Consumers Credit Union has routinely offered sky-high rates, even in a plummeting rate environment, earning this account the title of best high-yield checking account.

While this is a tiered rate account, the lower tiers — which can be earned with fewer requirements — still offer attractive rates that are well above those offered by other banks and credit unions. You can earn up to 4.09% APY on balances up to $10,000 if you spend $1,000 or more in CCU credit card purchases each month; you can earn 3.09% APY on balances up to $10,000 if you spend at least $500.

What to watch out for: While balances between $10,000 and $25,000 — regardless of your tier — earn an APY of 0.20%, it’s worth noting that balances over $25,000 earn an APY of just 0.10%.

In addition, if you don’t meet the monthly activity requirements, which include a debit transaction minimum or credit card payments, you’ll earn an APY of just 0.01% and won’t receive ATM refunds. The account also has an overdraft fee of $30.

Best free checking account: Axos Bank Rewards Checking

Rewards Checking - 5 Qualifications

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on Axos Bank’s secure website

Member FDIC

Highlights:

  • No overdraft or non-sufficient funds fees
  • Unlimited domestic ATM fee reimbursements
  • APY: Up to 1.00%
  • Maintenance fee: $0
  • Current promotions: N/A

Read the full review

Why we picked it: We’ve crowned the Axos Bank Rewards Checking account as the best free checking account not only for its attractive features, but also for its consistency.

The Axos Bank Rewards Checking account has consistently offered competitive APYs — even as earning rates drop at other banks. This account also offers all of the bells and whistles that the best standard checking accounts are known to include, like ATM fee reimbursements and no overdraft fees.

What to watch out for: The Axos Bank Rewards Checking account is a tiered, interest-earning variable rate account. So, in order to earn the 1.00% APY, you must meet the following requirements:

  • Receive monthly direct deposits totaling $1,500 or more
  • Use your debit card for a total of 10 transactions per month (minimum of $3 per transaction)
  • Maintain an average daily balance of $2,500 in a Managed Portfolios Account
  • Maintain an average daily balance of $2,500 per month in a Self Directed Trading Account
  • Use Rewards Checking to make an Axos bank consumer loan payment, including mortgage, personal and auto loans

Realistically, the highest APY earned by most consumers will be 0.70% because of the direct deposits and debit card transactions. But Axos does incentivize using their other banking products with their Rewards Checking interest rates.

If you don’t meet those requirements, you’ll receive a reduced APY from what’s advertised. There’s also a $50 minimum balance required to open this account.

Best no-fee checking account: Discover Cashback Debit

Discover Cashback Debit

SEE DETAILS Secured

on Discover Bank’s secure website

Member FDIC

Highlights:

  • No insufficient funds fee
  • Access to over 60,000 no-fee ATMs
  • 1% cash back on up to $3,000 of debit card purchases per month
  • APY: None
  • Maintenance fee: $0
  • Current promotions: N/A

Read the full review

Why we picked it: The Discover Cashback Debit checking account has no monthly maintenance fees, no insufficient funds fees and access to over 60,000 ATMs.

As the icing on the cake, this account offers 1% cash back on all debit card purchases, up to $3,000 per month. This is a unique perk among checking accounts, and if you prefer cash back to earning interest, this could be the account for you.

What to watch out for: There aren’t too many surprises with this account — just be aware that fees for non-Discover ATMs may apply.

Best checking account bonus: HSBC Premier Checking

Online HSBC Premier Checking

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on HSBC’s secure website

Member FDIC

Highlights:

  • Unlimited ATM fee rebates within the U.S.
  • No foreign transaction fees
  • $50 monthly service waived if you meet any one of the requirements
  • APY:0.01%
  • Maintenance Fee: $50
  • Current Promotions: $450 welcome bonus

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Why we picked it: HSBC is currently offering up to a $450 welcome bonus for those who open a new Premier Checking account by Aug. 31, 2021. In order to earn the bonus, you must set up qualifying direct deposits into your Premier Checking account and make recurring deposits totaling at least $5,000 per month for three months. You also must be a new HSBC customer to take advantage of this offer, and fund your new account with new money.

What to watch out for: The Premier Checking account earns 0.01% APY on balances of $5 or more. It also charges a hefty $50 monthly fee.

Best rewards checking account: Radius Bank Rewards Checking

Rewards Checking

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on Radius Bank’s secure website

Member FDIC

Highlights:

  • Earn up to 1.00% cash back on debit card purchases
  • Offers early direct deposit
  • Unlimited ATM fee rebates
  • APY:0.10% on balances between $2,500 and $99,999, 0.15% on balances over $100,000
  • Maintenance Fee: $0
  • Current Promotions: N/A

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Why we picked it: Radius Bank’s Rewards Checking account features a robust rewards program that offers up to 1.00% cash back on debit card purchases, as well as a decent APY on the funds in your account. There’s a minimum $100 opening deposit required for this account.

This account also stands out for its unlimited ATM fee rebates and early direct deposit feature, as well as having no fees.

What to watch out for: To earn the cash back, you must maintain a minimum balance of at least $2,500.

Best no-ATM fee checking account: TD Bank Beyond Checking

TD Beyond Checking

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on TD Bank’s secure website

Member FDIC

Highlights:

  • No fees at TD Bank ATMs, and reimbursed fees for out-of-network ATMs for accounts that maintain a daily balance of at least $2,500
  • No required minimum opening deposit
  • Overdraft fees reimbursement offered up to two times per year
  • APY:0.01% on balances greater than $0.01
  • Maintenance Fee: $25, waived with certain conditions.
  • Current Promotions: Earn $300 when you open an account and make at least $2,500 in direct deposits within 60 days of opening. Offer expires Nov. 30, 2021.

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Why we picked it: TD Bank’s Beyond Checking account is a great option for those who prioritize fee-free access to ATMs.

With this account, not only do you receive fee-free ATM access to TD Bank’s network of ATMS, but if you maintain a minimum daily balance of at least $2,500, TD Bank will reimburse you for any fees incurred at out-of-network ATMs.

What to watch out for: Be aware of the low APY offered, and note that there’s also a $35 overdraft fee associated with this account. You can waive the $25 maintenance fee with $5,000 in direct deposits per statement cycle, a $2,500 minimum daily balance or $25,000 in combined balance across TD Bank accounts.

Best business checking account: Axos Bank Business Interest Checking

Business Interest Checking

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on Axos Bank’s secure website

Member FDIC

Highlights:

  • Unlimited domestic ATM fee reimbursement
  • Up to 50 free transaction items per month
  • Monthly service fee can be waived if you maintain an average, daily minimum balance of $5,000
  • APY: Up to 0.81% on balances between $0 and $49,999.99
  • Maintenance Fee: $10

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Why we picked it: Axos Bank’s Business Interest Checking account stands out among other business checking account products for a myriad of reasons, most notably its surprisingly low fees.

In addition, Axos Bank throws in a number of freebies with its Business Interest Checking account, from ATM fee reimbursements to free checks, making it our pick for the best business checking account.

What to watch out for: Transactions are $0.50 each after the first 50, and there’s a $100 minimum opening deposit required for this account. Balances of $50,000 or above are subject to lower APYs. The APY may be lower if the average daily minimum balance is less than $5,000.

Best checking account for students: Chase College Checking

Chase College Checking

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on Chase Bank’s secure website

Member FDIC

Highlights:

  • $6 monthly service fee waived for up to five years if you’re 17 to 24 years old, have proof of student status and are enrolled in college, or if you meet any one of Chase’s monthly requirements
  • No monthly service fee on a Chase Savings account linked to this account for overdraft protection
  • APY: None
  • Maintenance fee: $6
  • Current promotions: $100 bonus for new Chase customers with qualifying activities. Offer expires Oct. 18, 2021.

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Why we picked it: The Chase College Checking account is a great option for students, as it waives its monthly service fee for those between the ages of 17 and 24 who have proof of a student status, for up to five years while in college.

With widespread ATM access, the ability to pay friends with QuickPay or Zelle and a robust mobile app, this account checks all the boxes for college students.

What to watch out for: For this account, you’ll need to show proof of student status. There’s also a $2.50 non-Chase ATM fee and $34 overdraft fee associated with this account.

Best joint checking account – PNC Virtual Wallet

Virtual Wallet w/ Performance Spend

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on PNC Bank’s secure website

Member FDIC

Highlights:

  • Free access to 18,000 ATMs, plus two PNC ATM fee reimbursements per statement cycle and up to $5 in fee reimbursements from other financial institutions’ ATM surcharges per statement cycle
  • Budgeting tools and features
  • Fee waiver
  • APY: None
  • Maintenance fee: $7, but waived if certain requirements are met
  • Current promotions: Earn up to $50 when you open a new Virtual Wallet account and fund it with a direct deposit of $500 or more within the first 60 days. Offer expires September 30, 2021. There are higher bonus amounts for larger direct deposits in the Performance Spend and Performance Select accounts.

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Why we picked it. The PNC Virtual Wallet is a standout checking account that supports joint ownership. This account comes with a plethora of budgeting tools that can help couples manage their money more effectively, such as the ability to create budgets for different spending categories and set up alerts for certain account activities. This account also has $0 monthly maintenance fee if you have a minimum of $500 in monthly direct deposits, or if you maintain a monthly balance of $500 in the Spend + Reserve account — both of which are easier to achieve with two people owning the account, as opposed to one.

What to watch out for: If you can’t meet the monthly qualifications to waive the monthly service fee, you’ll have to pay $7 per month. In addition, your balance doesn’t earn interest.

Other honorable mentions

Charles Schwab High Yield Investor Checking: This account from investment firm Charles Schwab offers a few attractive perks like unlimited ATM fee rebates worldwide, no monthly fees or minimums and no foreign transaction fees. The Charles Schwab High Yield Investor Checking account falls flat with its paltry 0.03% APY on all balances over $0.01, which can’t quite compete with the best high-yield checking account, the Consumers Credit Union Rewards Checking account, which earns up to 4.09% APY.

Aspiration Spend and Save: The Aspiration Spend and Save cash management account is one of the most fee-friendly accounts out there, even allowing you to pay a monthly fee in an amount that you think is fair. Aspiration comes with the added bonus of access to over 55,000 ATMs and cash back rewards — especially at conscience-minded businesses. To earn the 1.00% APY you’ll have to open a Spend and Save Plus account and pay $7.99 per month or $5.99 per month if you pay annually. Only balances up to $10,000 will earn the competitive 1.00% APY. Balances over $10,000 will earn 0.10% APY.

Betterment Checking and Cash Reserve: Another cash management account, Betterment Checking and Cash Reserve maximizes your FDIC insurance up to $1 million and provides unlimited transfers in and out of your account. It also earns interest at 0.10% APY. A minimum deposit of $10 is required, but there is no minimum balance required to earn the attractive APY.

Chase Premier Plus Checking: A step up from Chase’s basic checking account, the Chase Premier Plus Checking account earns a paltry 0.01% APY (across all balances) and waives select fees, including on the first four non-Chase ATM transactions per month. However, its features don’t quite justify the $25 monthly service fee, which you can only waive by meeting certain requirements.

Chime: The mobile-first Chime account is great for individuals who have trouble with traditional checking accounts. It allows you to receive direct deposits up to a couple days early, grow savings automatically and even overdraw your account for free if you meet certain eligibility requirements. Chime also provides free access to over 38,000 ATMs, which you can access with the account’s linked debit card. Despite all these perks, Chime doesn’t earn any interest on account balances. However, Chime does stand out for having a robust, no-overdrafting policy.

TIAA Bank Yield Pledge Checking: Despite TIAA Bank’s Yield Pledge promise, which ensures their rate will always remain among the top 5% of competitive accounts, the Yield Pledge Checking account earns a pretty low APY of 0.10%. The minimum opening deposit is $100, but all balances are eligible to earn the 0.10% APY. Luckily, there’s no monthly service fee, nor are there fees for out-of-network ATM usage. Plus, you can get reimbursed for ATM surcharges. This made it a strong contender for our Best Overall Checking Account.

Varo Money: Pioneering fintech company Varo offers a pretty much fee-free, checking-like cash management account, which allows customers who meet certain requirements to overdraft up to $50 at no cost. Varo can get you your paycheck up to two days early with direct deposit, and it also offers fee-free access at over 55,000 Allpoint® ATMs and provides a free Varo Visa® Debit Card, which you can lock in the app at any time. Though all of these perks are nice, the checking account doesn’t earn interest; you’ll have to open the Varo Savings Account for that.

Capital One 360 Checking: The Capital One 360 Checking account is easily accessible — via its debit card, mobile and online — and there’s no fee or minimum balance to worry about. You also get access to over 39,000 Capital One and Allpoint ATMs for free. However, its low 0.10% APY can’t quite keep up with its competitors. All balances are eligible to earn Capital One’s 0.10% APY.

Bank5 Connect High-Interest Checking: Bank5 Connect’s High-Interest Checking account isn’t always so high-yield, as it earns 0.20% APY. There is a minimum deposit of $10 required to open and a minimum balance of $100 required to earn interest.Still, the account is relatively customer-friendly as it doesn’t charge any monthly maintenance fees and offers free access to thousands of ATMs nationwide in addition to up to $15 in surcharge reimbursements.

Methodology

We look at hundreds of financial institutions and reviews to determine our picks for the best checking accounts. Specifically, we consider the following factors when making our selections:

  1. Checking account rates: We heavily weighted the APYs offered by each institution on their checking accounts, paying attention to both high interest rates and the consistency at which these rates were offered. Higher and more consistently competitive interest rates were prioritized.
  2. Minimum deposit and balance requirements: We also controlled for account accessibility by looking at minimum deposit and balance requirements, prioritizing banks and accounts that have low minimum requirements or none at all.
  3. Bank account fees: Because the best checking accounts are the ones that don’t cut into your hard-earned money, we favored checking accounts that don’t charge monthly service fees or ATM fees, as well as those that offer ATM-fee reimbursements. If accounts had the same APY and minimum requirements, we went with the account with lower fees.
  4. Special offers: As an added bonus to their checking accounts, some institutions offer cash bonus offers for new customers or even cash-back rewards for debit card usage. We made sure to include these special accounts and offers so you can get more from your account.
  5. Specialized accounts: Checking accounts aren’t one-size-fits-all — nor should they be. When we did our search, we also looked for specialized accounts with specific features made for certain groups, like students, business owners and joint account holders. Because different accounts are intended to serve different purposes, the features we prioritized for each account type may vary.

What should I look for in a checking account?

When shopping for a checking account, keep in mind that its main purpose is providing a convenient and safe place to stash the cash you use for your daily spending. With that in mind, factors such as safety, ease of use and minimal costs should be top-of-mind.

Here’s what to look out for specifically when you’re searching for a checking account that’s right for you:

An account that meets your needs

A great first step to finding the right checking account is understanding what you want from a checking account. Of course, you’ll want an account that’s easily accessible. But only you can decide whether that means prioritizing brick-and-mortar branches, mobile app access or worldwide ATMs. As debit cards are a big part of accessibility, you should also make sure you’re getting a debit card that’s protected.

If you’re a senior citizen, a student or perhaps a couple looking for joint account ownership, these are things to consider when making your checking account wishlist. As shown above, there are several specialized accounts out there that offer special deals and features for members of these groups.

Next, determine whether you want your checking account to earn interest or other rewards. Often these rewards only add to the checking account experience, rewarding you for owning the account rather than you paying to own it. Rewards on some accounts may also offset any fees you face.

If you don’t know where to start, it helps to check out high-yield checking accounts first. These accounts are most often free, easily accessible, provided by reputable institutions and, as an added bonus, can earn you money.

An account with few or zero fees

It’s a good idea to check for bank fees when shopping for a checking account. After all, why pay your bank fees for access to your own cash?

Thankfully, there are many checking accounts that charge little to no fees. Online banks, in particular, offer checking accounts with no fees, as they are able to save on the operational costs that burden brick-and-mortar banks. Some checking accounts even offer unlimited ATM reimbursements or a monthly allowance for reimbursable ATM surcharges.

Since many checking accounts offer little to no interest, it’s even more critical to opt for an account with minimal fees. Common checking account fees include:

  • Maintenance fees
  • Minimum balance fees
  • ATM fees
  • Overdraft fees

If your checking account has any monthly balance or spending requirements to waive the maintenance fee, make sure you stay within those limits to avoid any unnecessary fees.

An account that offers widespread ATM access

There’s nothing worse than needing cash in a pinch and not having a way to get it. Then, even when you find an ATM, it’s out of your bank’s network, so to add insult to injury, you’re charged a fee (or two) for using the ATM.

You can avoid this situation by finding a checking account that offers widespread ATM access. Often, this isn’t even brick-and-mortar banks, which may offer free access to a few thousand branded ATMs across the country. Online banks tend to go above and beyond, offering free access to tens of thousands of ATMs, often worldwide, through ATM networks like AllPoint and MoneyPass.

An account with FDIC Insurance or NCUA insurance

You want to make sure your money is protected no matter what. Federal Deposit Insurance Corporation (FDIC) insurance — and National Credit Union Administration insurance for credit unions — insures your money up to legal limits, which for an individual’s checking account would amount to $250,000. This means that up to $250,000 in your checking account will be recovered if your bank or credit union fails.

In the event of institution failure, you’ll either get a check for the amount that was in your checking account, or set up with a new account for the same amount at another insured institution.

An account that has overdraft protection

Overdraft protection is a crucial feature, especially if you’re often at risk of overextending your funds. This feature works in a few different ways, depending on the institution and the account. Often, a bank’s overdraft protection will link your checking and savings accounts, drawing on your savings account when you overdraft from your checking account. Other iterations may simply not allow you to overdraft the account at all.

Typically, you’ll have to enroll in overdraft protection. Some accounts charge an extra fee for overdraft protection, but many of the best no-fee checking accounts offer this feature at no cost.

An account that pairs with a high-yield savings account

You might want to pair your checking account with a high-yield savings account if you’d like to maintain your day-to-day spending, but also stash away a portion of your cash to earn a higher rate of return in longer-term savings. A high-yield savings account is also a great option for those who don’t want to be tempted with the ability to easily spend their savings on everyday needs.

If this sounds like the right setup for you, start by finding a checking account that fits your daily spending needs and is easily accessible and FDIC-insured. You can then track your spending and set up regular deposits into a separate, high-yield savings account for any excess cash you don’t spend. Keep in mind that not all savings accounts are created equal, so it’s worth shopping around for the best rates when it comes to your savings account, too.

FAQ: What should I know about checking accounts?

A checking account is a bank account for your day-to-day spending needs. They typically come with a debit card, which allows you to make purchases and provides quick and easy access to cash, making it a safer option than carrying cash. Many checking accounts are also offered with paper checks.

Unlike savings accounts, checking accounts typically have no transaction limits, making them the most liquid option for your money aside from holding large amounts of cash. Checking accounts are also FDIC-insured which adds peace of mind.

Checking accounts are used for your everyday spending needs and generally don’t carry interest (however high-interest checking accounts do exist); by contrast, savings accounts usually carry higher interest rates and are meant for you to save money over the long-run.

Keep in mind that savings accounts will typically restrict access to your cash to around six withdrawals per month while checking accounts allow you almost unrestricted access to any cash you hold in the account.

It’s a good idea to maintain a free or no-fee checking account for day-to-day use. Generally speaking, the best checking accounts allow unfettered access to cash and carry no monthly fees, ATM-fees, or other account surcharges.

It’s generally better to keep just enough in your checking account to cover your daily needs, meet any minimum balance requirements and avoid any possible overdraft charges.

Despite their everyday usefulness, checking accounts aren’t the best places to stash your cash long-term. Savings accounts usually offer higher interest rates, making them a better place to store cash.

There are many free checking account options out there. Some options — especially those offered by online banks — are free accounts that even offer extra features like interest and rewards. Keep in mind that many banks will still feature things like inactivity fees, minimum balance requirements or paper statement charges for their “free checking” accounts.

If you’re paying monthly maintenance fees, minimum balances fees or even third-party ATM fees, it’s worth it to do some research, as there are other accounts out there that will give you more bang for your buck and won’t nickel and dime you for it either. Shop around to find the best free checking account for you.

Yes, many checking accounts earn interest, although the amount offered is typically far less than rates offered by savings accounts or money market accounts.

If you’re looking for the best high-yield checking account, many smaller banks and credit unions offer Kasasa checking accounts, which are essentially free checking accounts that offer higher interest rates, so long as you meet a few monthly requirements.

Checking account interest is taxed if you earned $10 or more in interest in a year. For all your interest-earning deposit accounts, your bank should send you a copy of Form 1099-INT, which they will also send to the IRS. This form will help you report the interest income on your tax return. If you don’t receive this form from your institution, but still earned $10 or more in interest, you will still have to report the interest on your taxes.

If you were lucky enough to earn $1,500 or more in interest, you will have to detail the sources of that income on Schedule B of Form 1040.

Almost every checking account offered by major banking institutions is insured by the FDIC, which provides an account holder with up to $250,000 in federal deposit insurance in the event the underlying bank runs into trouble.

As with any other deposit account, it’s easy to find out whether your checking account has FDIC coverage. You can check to see if your financial institution has FDIC insurance by looking for the “Member FDIC” tag that often appears at the bottom of the bank’s marketing materials.

FDIC insurance covers deposits in checking accounts, savings accounts, CDs and money market accounts, up to $250,000 per ownership category per person within a single financial institution. Credit unions receive deposit insurance from the National Credit Union Administration (NCUA), up to $250,000 per owner, per insured credit union, per account category.

One checking account should suffice for most shoppers. However, there may be instances where you’d want to open multiple checking accounts to help keep your finances organized or separated for different purposes.

For example, many small business owners have their own business checking account to segregate their professional finances from their personal finances.

Some parents may even want to open separate student checking accounts to help teach their kids or budding college students financial responsibility and keep track of their finances.

Keep in mind that you can also open joint checking accounts, which make it easier for couples and those who share their lives to also share finances and track spending. With a joint account, two or more people share ownership, and can deposit and withdraw funds from the same checking account.

Every checking account will feature a routing number and an account number. These two numbers are associated with your bank account and serve as unique identifiers for your account.

The routing number associated with your checking account is a nine-digit string of numbers that identifies the institution that manages your checking account.

Your bank account number identifies your personal account and is the unique identifier that your bank uses to direct cash or wire transfers, track your balance, and rout payments as needed.

If you were rejected after trying to open a checking account, it’s probably because you have a rocky past with previous accounts. When you apply for new bank accounts, most institutions run your information through ChexSystems, which keeps a record of your banking history when institutions report it. This means any history of overdrafts, negative account balances, account closures and the like will be available for ChexSystems users to see.
If you were rejected from opening a new checking account, take a look at your ChexSystems report. It may help to figure out what bad marks on there you may be able to change. There may even be errors on the report that you can dispute and have removed.

A second-chance checking account is a type of checking account available to those who might not otherwise qualify for a traditional checking account due to their credit or ChexSystems history.

It may be worth exploring a second-chance checking account if your banking history might have been blemished by closing an account with a negative balance or outstanding fees.

Typically, second-chance checking accounts have lower spending limits, fewer features and may charge monthly maintenance fees. However they exist mainly to assist people who are determined to get their financial lives back on track. Once you’ve had the chance to rebuild your credit history, you may be able to trade back up for a standard checking account.

Deposit accounts, including checking and savings accounts, are not included in your credit report, since you’re not borrowing money from these kinds of accounts. So the way you use your checking account or even when you close a checking account doesn’t affect your credit.

If you overdraft your checking account and don’t pay back what you owe to your institution, however, that can land in your credit report if the institution sends it to collections. That’s because it’s become more about your debt, which is reported in credit reports, than simply your checking account.

Overdraft protection works a lot like it sounds: it protects you when you overdraft your account. Often, overdraft protection links your checking account to a savings account. Any time you overdraft your checking account, funds are automatically pulled from the savings account to cover the purchase.

Other institutions may offer overdraft protection that simply doesn’t allow you to overdraft the account. This prevents the transaction from going through, but also prevents you from facing an overdraft fee and recovering the extra cost.

Depending on the type of overdraft protection and the institution, overdraft protection can come at an extra fee, or it could be free.

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