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Here’s What Really Happens When You Miss a Credit Card Payment

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Your phone rings — and rings, and rings some more. You know who’s calling. You know what the caller wants, too, but you can’t afford to give the money you owe on your credit cards. So, you let the debt collector leave a voicemail you have no intention of returning.

That’s the wrong way to deal with delinquent credit card debt, says Michaela Harper, debt counselor and director of the Community Education for Credit Advisors Foundation in Omaha, Neb.

“Don’t be afraid to talk to your creditor,” says Harper. “Avoiding them makes the problem worse because it sends it onto the next division” and brings your debt closer to being charged-off, which Harper says consumers with past-due debt should do their best to avoid. (More on that later.)

Credit card debts — or most debts for that matter — become delinquent the moment you miss a first payment. The events that follow the missed payment depend on how long the past-due debt goes unpaid. It begins with friendly reminder calls from the bank to pay your credit card bill, and can culminate in losing up to 25 percent of your annual income to wage garnishment.

The portion of consumers missing credit card payments has been on the rise since the lowest levels of delinquent credit card debt ever recorded were reached two years ago. About 2.47 percent of credit card loans made by commercial banks were delinquent in the second quarter of 2017, according to Aug. 23 figures from the Federal Reserve Economic Database.

Below is a timeline chronicling what happens when you miss a credit card payment, as well as tips from debt management experts on what you can do to mitigate the situation at each point. (You can jump to a specific time period by clicking on the milestones below.)

Zero to 30 days past due: Missed a payment

After you miss your first payment, your debt is delinquent and the clock starts ticking. Your bank should begin to contact you to remind you to make a payment. You are also likely to incur a late fee.

The first 30 days will sound more like courtesy calls, says Randy Williams, president and CEO of A Debt Coach. In reality, the bank is trying to verify your address and personal information to update the system in case your debt becomes more delinquent. (Williams used to work as a bill collector before switching over to debt consulting.)

What you can do

At this point, the bank’s agents may be more willing to provide customer service, so you can ask for an extension or create a payment arrangement to address the past-due debt before the missed payment begins to impact your credit report, which can be as early as 30 days past due. You may also try your luck at asking if the bank could waive any late fees already incurred, although the creditor is not obligated to extend this courtesy.

There’s only so much leeway a bank will give you, says Gordon Oliver, a certified debt management professional at Cambridge Credit Counseling. If you’ve asked for a late payment or interest charge to be waived in the past, you won’t have much leverage.

“There will be different reasons why a creditor may not extend those benefits at the time, but usually those terms are for borrowers who are in better standing,” Oliver adds.

30 to 90 days past due: Collection calls begin

Over the 30- to 60-day delinquency period, the bank will attempt to reach you to collect the past-due amount on your credit card bill.

“This is when they are trying to figure out what’s wrong. They are trying to collect the money,” says Williams.

“At this point it’s starting to affect your credit,” says Williams. He says the robo-collection calls may come as often as every 15 minutes. Borrowers with higher credit scores are likely to see a bigger drop than borrowers with lower scores. According to FICO data, for example, a 30-day late payment could bring a 680 credit score down 10 to 30 points and a 780 score down 25 to 45 points.

In addition to seeing your credit score drop, you will be charged late fees on the past-due account. After you have owed debt for two payment cycles, the CARD Act allows creditors to flag you in their system as a “high-risk” borrower, which means the interest you currently pay will rise to whatever the bank charges for customers at a high-risk status. That number varies from bank to bank but in some cases can get as high as 29.99 percent. The rate will stay that high at least until you have made six consecutive on-time payments, at which point the bank is required by law to reset the rate.

However, “the law doesn’t say they have to do it on their own,” says Harper. So, you will likely need to request a reset. You can find the APR charged to high-risk borrowers in your credit card terms.

What you can do

Harper says if you respond at this point, the bank may ask you to negotiate a payment arrangement.

“Never make a promise to pay that you can’t keep just to get someone off the phone,” says Harper. “If you are silent, you agree to the payment.”

Missing promised payments also gives the bank more leverage if the bill eventually goes to court, says Harper. “If they walk into court and they can point to all of the promised payments, it undermines your credibility.”

Harper advises debtors to be very clear if they cannot meet the bank’s proposed payment arrangements. You need to specifically tell them you cannot make the payments. If possible, take a look at your budget. If you find you are able to send them a small amount every month, tell them.

“That’s a valuable thing because it goes back to when the account charges off. You can slow down your progression toward charge-off by making the partial payments,” says Harper.

A charge-off happens when a creditor believes there is no chance of collecting your past-due debt, so the debt’s considered a loss. The debt gets written off the creditor’s financial statements as a bad debt and sold or transferred to a third-party collection agency or a debt buyer.

“If they feel like it’s a tough situation [you] are going through they will refer [you] to a credit counselor” around the 60- to 90-day mark, says Williams. Again, that benefit may not be extended to all consumers facing financial hardship.

90 to 120 days past due: Bank requests balance in full

After your bill is 90 days overdue, the bank will turn collection over to its internal recovery department to engage in more aggressive collection attempts. Williams says the bank will now be calling for the balance in full, not only the past-due amount.

The bank’s collectors will continue to call, but they may also send you multiple letters every day, or may attempt to reach you via social media, emails or emergency contacts.

Harper says the account may stay with the bank’s internal collections for another 90 days (180 days past due), but it’s important to note that at the 120-day past-due mark, your debt is at risk of getting charged off and being sold to a third-party collection agency.

That’s because the CARD Act states the past-due amount needs to be the equivalent of six months’ worth of your credit card’s minimum payment in order for the debt to be charged off. Including late fees and the amount added in higher interest payments, consumers may reach that figure in as little as four calendar months.

What you can do

If you can’t give them the entire past-due amount or balance in full, take a serious look at your budget. See if there is any room to make even a small payment. If you can find a few dollars, you may be able to enter a repayment plan with the bank, which will at least pause the collection calls. Don’t forget to leverage the collector’s insider knowledge. Explain your situation and ask if you can negotiate a solution with the bank.

“You want to pay off the debt, they want to pay off the debt. They may have solutions they can offer you that you don’t know about,” says Harper.

Once you’ve got an active repayment plan in place, the bank will pull you out of the collection list, Harper says.

120 to 150 days past due: Hardcore collection attempts

Watch your credit report carefully after your account becomes 120 days past due, as it may be charged off at any point. At this point, the collectors will continue to try every channel available to them to get in touch with you and collect on the debt. The attempts may get closer together and collectors may try more aggressive tactics to scare you into paying up.

“One hundred and twenty to 150 days, it is hardcore. Now they are going to offer you a settlement. They will do whatever they want to try and get to you to pay the debt off. It’s basically motivation to get you to pay now,” says Williams.

Debt collectors at this point may also take time to remind you of your rights under the CARD Act and Fair Debt Collection Practices Act as well as their right to collect on the past-due debt.

The bank’s collectors may not directly say they will proceed with legal action or wage garnishment if they do not intend to, as that is illegal under the FDCPA, but they may remind you of those possibilities if you do not pay and emphasize the bank’s right to collect on the debt owed to them, Williams says.

Williams adds, “They never say they are going to sue you; they say, ‘We have the right to protect our asset.’”

What you can do

Williams says at this point the debtor essentially has three options. Bring the account current by paying the entire past-due amount, arrange a debt settlement plan with the bank or try going to a credit counselor to create a debt consolidation plan.

“Near 120 days past due, they need to get some form of help to remedy the account before it goes to a charge off,” says Oliver, who adds that the timing the charge off will be difficult to predict.

For those who may be behind on several bills, Oliver also recommends getting some form of financial counseling to create a plan that addresses all your financial issues.

150 to 180 days past due: Last chance

At 150 days, collections efforts will remain aggressive and may even increase in frequency as the bank is now concerned about losing the debt to a charge-off.

Once your credit card payment is 150 days past due, you may start to hear the bank’s agents’ tactics shift as they may make a last-ditch effort to recover the debt, according to Williams.

What you can do

You will still have the options to pay the balance in full or reach a settlement with the bank, but you may have an additional option: Re-age your debt.

When your account is past due and you enter a re-age program, the late payments and collection activity are removed from your account. As a result, “your credit score may improve by 10 to 15 points if not growing every month from there,” according to Williams.

You will generally be asked to make at least three on-time payments on the debt before your account is re-aged. For example, the bank could ask you to pay $100 each month for three months before bringing your account back up to a current standing, but the bank will add the interest and fees you’ve already incurred to the total amount you owe. After the account is re-aged, you’ll go back to making minimum payments on the total amount of debt outstanding. Re-aging the account may also remove the “high-risk” stain from the account so your interest rate drops to to whatever it was before.

Williams says a re-age can be seen as a win-win for both parties: You are able to catch up on your delinquent debt and — in some cases — have its impact removed from your credit report, and the bank is able to recover the interest and fees that have accumulated since your account became delinquent.

Of course, the credit card company doesn’t have to allow you to re-age the debt and may not offer the option to you, but there is a possibility it will do so if you ask. Keep in mind you are only allowed to re-age an account once in 12 months and twice within five years, per federal policy, and re-aging is only an option on accounts that have been open for nine months or longer. Credit card issuers are allowed to set more strict re-aging rules for its accounts, as well.

After 180 days: Charged off to a third party

When you are about six months past due, it is extremely likely the bank will charge off your account and sell the debt to a third-party collection agency. If the bank does not charge off your account, it may take the matter to court.

If it goes to collection, third-party debt collectors may employ some of the same tactics the bank’s collectors did. Most collection agencies will push hard for the first 90 days, then at the end of that point in time they may decide to sue you, Harper says. Or they may sell your debt to another collections agency.

The third-party collectors will attempt to contact you using every channel available to them for the next 90 days or so, before they must decide to either charge off the debt or sue you. The collectors will likely demand you pay the full balance or ask you pay the balance in thirds, says Harper. If they can’t get a hold of you or get you to arrange a payment plan in that time, they may decide to turn it over to an attorney.

What you can do

You should try the same tactics that you would have used with the bank’s internal collections agency with the third-party agency, negotiating the price down and reaching a settlement with the third-party collector. If you don’t respond to the collection requests, you may be sued.

You may not be sued for some time. Companies can only sue you for unpaid debts within a certain period of time, called a statute of limitations — anywhere within three to 10 years, according to your state’s law. Your debt may be sold and resold several times before that happens. Check with the office of consumer protection at your state’s attorney general to find out what the rules are in your state.

If you are served with a lawsuit, you should check the letterhead to make sure the attorney or company filing the suit on behalf of the collections agency is licensed to practice law in your jurisdiction, says Harper, as you cannot legally be sued for credit card debt by an attorney outside your jurisdiction.

You should also be sure to respond to the lawsuit. If you don’t, you’ll likely lose. The court can automatically side with the lender if you don’t show up in court, also known as a default judgment. That may result in getting your wages or federal benefits garnished to pay the debt, not to mention the credit damage a judgment causes. Federal law states a creditor can garnish no more than 25 percent of your disposable income, or the amount that your income exceeds 30 times the federal minimum wage, whichever is less.

If you can’t afford to settle

If, given your current financial situation, the debt is unmanageable for you and you are not able to settle the account, you may want to consider bankruptcy. But you will have to file before a judgment is entered against you in court, which may be tricky to time, Harper says.

Given the difficulty in timing when the creditor will take your account to suit, you shouldn’t wait if you think bankruptcy is an option for you. Read here for more information on how and when to file for bankruptcy.

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Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at [email protected]

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News

2020 Fed Meeting Predictions — Federal Funds Rate Still on Ice

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

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As we open a new year of Fed meetings, it looks like we’re beginning 2020 with a continuation of the Federal Reserve’s policy pause. They haven’t made a change to the federal funds rate since October, and it’s largely looking like things will stay that way for the time being.

Whenever the Fed decides to make a move, it’s certain they will seek to continue the U.S. economy’s expansion, which is now in its 11th year. The Fed remains optimistic about the U.S economy’s outlook, a good omen as we move through 2020 and a new decade. Read on for our predictions for each upcoming Fed meeting and updates on what went down at the most recent meeting.

Our January 2020 Fed meeting predictions

We expect the Fed to hold the federal funds rate steady. Fed Chair Jerome Powell indicated that it would “materially reassess” the Fed’s outlook to prompt another change in their policy stance last October, after the Federal Reserve cut the federal funds rate for the third and final time in 2019. We have not seen the sort of change in the data that would deliver such a material reassessment.

Back in December, the Fed left the federal funds rate unchanged at 1.50% to 1.75% , and the data has held steady since then. The latest labor market data shows employment remains strong, even as wage growth remains flat. Recall that Powell has reiterated that he’d need to see wage growth before hiking rates, so we know not to expect any rate hikes. Otherwise, growth in housing starts — a key metric for the housing market — is exceeding expectations, although manufacturing remains soft.

All in all, these economic indicators are neither hot nor cold, and pretty clearly anchor expectations that the Fed will keep rates on ice again next week.

Chair Powell should provide some insight into what to expect for 2020 at his post-meeting press conference. As we move into the new year, Powell will likely outline the Federal Open Market Committee’s (FOMC’s) economic outlook for 2020. Again, we probably won’t see much change to their general sense of restrained optimism. Still, it’s important to tune in for some insight into what the Committee is focusing on.

For one, we may get an update on the “downside risks” that have been periodically menacing the otherwise healthy U.S. economy over recent months. It was these risks that prompted the Fed to cut rates last July and continue cutting into October, although lately those risks seemed to have moved in a more positive direction.

As always, it’s important to remember that whatever Powell and the FOMC indicate about the economy in January, economic conditions change throughout the year, as will the Committee’s response to those changes.

Remember this time last year? Markets were bracing for a recession that never arrived, while these days, recession’s not really coming to mind. But if last year taught us anything, it’s to stay on top of the economic goings-on — the outlook can change quicker than you realize.

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.

 

Upcoming Fed meeting dates in 2020:

Here is the FOMC’s calendar of scheduled meetings for 2020. 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 2019.

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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.

 

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.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

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Study: Rent Is Higher Than Minimum Wage Pay in these 16 Cities

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

Rent prices have increased by 2% to 4% nationwide each year since 2011, according to CoreLogic. While gains in federal and state minimum wage rules have somewhat mitigated the bite for lower-wage earners in certain areas, it’s often not enough to compete with the rising cost of housing. Meanwhile, the population of renters has increased, forcing renters to compete for a finite supply of rental housing, which is already pricing out some people.

Using data from the Joint Center of Housing Studies and the Economic Policy Institute, MagnifyMoney identified 16 cities where the median rent claims all of a minimum wage worker’s take-home pay, and then some. Let’s take a look at big cities that are more affordable and ones where the rent is too darn high.

Key findings

  • Austin, Texas, is the least affordable major U.S. city for minimum-wage workers. Austin’s median rent is equal to 143% of take-home pay at the minimum wage.
    • The median rent in Austin is $1,220 per month, while the city’s minimum wage stands at $7.25 an hour.
    • Austin workers making minimum wage would need to work about 200 hours a month to be able to afford the median rent of $1,220.
  • Chicago is the most affordable large city, with a minimum wage of $13 an hour. But even there, the median rent of $1,050 per month will claim 69% of a minimum-wage worker’s take-home pay.
    • In Chicago, minimum wage workers would need to work just over 96 hours to make enough to pay the median rent of $1,050.

If you are able to save some of your paycheck after rent and expenses, an online savings account with a high APY and no minimum balance may be a good place to start.

A closer look at where minimum wage doesn’t cover rent

The table below shows the median rent as a percentage of take-home pay for minimum-wage workers in 34 of the largest U.S. cities. In the top 16 cities listed, the median rent costs more than 100% of a minimum-wage worker’s monthly take-home pay.

In 12 of the 16 cities where the minimum wage to median rent ratio is the highest, minimum wage is less than $10 per hour. Half of these 16 cities earn at the federal minimum wage of $7.25.

But a higher minimum wage doesn’t necessarily translate to a lower percentage spent on rent. In San Francisco, for example, the high minimum wage of $15.59 is overwhelmed by the high median monthly rent of $1,860.

The following map offers a geographical visual of where you can expect to pay a larger (and smaller) percentage of your take-home pay on rent as a minimum-wage worker.

Of the cities we looked at, we found that median rent tends to eat up more of a minimum-wage worker’s take-home pay in the South. The Midwest, on the other hand, may be more affordable for minimum-wage workers, at least when it comes to rent.

Methodology

In December 2019, MagnifyMoney calculated the minimum wage of workers in 34 of the nation’s largest cities — those with a population of 300,000 or more in 2018 — to determine the relative affordability of rental housing. Our findings are based on data from the Joint Center of Housing Studies for median rent and the Economic Policy Institute for minimum wages. To find estimated take-home pay after payroll tax, we assumed 16% withholding in Social Security, Federal Insurance Contributions Act (FICA), Medicare and federal income tax.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here