With a new President and post-pandemic woes still evident, the Fed tales a breather
Will President Trump's tariffs and other economic policies push up inflation and unemployment?
Nobody knows. And that includes the Federal Reserve, which today decided to leave interest rates unchanged until there are clearer signs of where the economy is headed.
What does this mean for you? It depends. If you're thinking about buying a new car, renovating your home or taking a round-the-world cruise, it will be expensive to borrow the money you need to do that. On the other hand, if you have cash in a high-yield savings account, you'll continue enjoying interest payments that are the highest in more than a decade.
If you have money in stocks and other investments, it's a little foggier. If you're well diversified (and no, that has nothing to do with DEI),you may be able to ride out the storm and maybe even come out ahead. The key is to have a bit of everything -- stocks, etfs, bonds, corporate debt, international investments and maybe some gold or other valuable metals thrown in for good measure.
It's a terrible time to have a lot of credit card debt. Rates are at historic highs. If you can, consolidating that debt might be prudent.
A tricky position
The Fed is in a tricky position. Normally, you would expect higher tariffs to push up consumer prices but, on the other hand, the tariffs may make it hard for companies to continue producing products and expanding or maintaining their workdforce.
The Trump Administration's crackdown on immigration may also cause issues, especially in areas that rely on an abundant supply of cheap labor. On the other end of the scale, companies that rely on highly education help from overseas may not be able to continue competing effectively with China and other economic foes.
So, either way the Fed looks, it sees threats. Keep interest rates high and you risk an economic slowdown. Cut interest rates too much and you risk rampaging inflation ($12 eggs, anyone?).
Follow the Fed
You could spend all day everyday reading economic advice but a simple way to put it is: follow the Fed. If the Federal Reserve is sitting frozen like a frog on a sunny rock, it might be wise to do the same: hang onto your money and keep it working for you and see how things look in a few months.
If you look around, you can find a bank paying 4.5% interest, which is pretty phenomenal by today's standards and better than you're likely to do as a small investor in the stock market.
If you feel your job may be getting shaky, it's even more important to hang onto as much cash as possible, just in case. It certainly can't hurt and it just might help.
Posted: 2025-03-19 19:57:50
