During the Federal Reserve’s inaugural meeting of 2024 on Jan. 30-31, the Federal Open Market Committee (FOMC) announced interest rates would continue to remain as is for now.

Interest rates are currently at a 22-year record-high rate of 5.25 – 5.50 percent, up from nearly zero percent in March 2022 as the FOMC attempts to combat high inflation. 

Although the Fed raised interest rates quite aggressively in order to lower inflation closer to its 2 percent goal, the Fed has not raised interest rates for quite some time now. There has not been a rate increase since the Fed’s July 2023 meeting even though the latest inflation reading came in at a hotter-than-expected 3.4 percent in December 2023,

Not only has the Fed paused any interest rate hike for four consecutive meetings, but in a statement after its January two-day meeting, the Fed shared that it had removed a reference included during its December 2023 meeting to “additional (rate increases) in 2024.” 

Specifically, the FOMC removed a clause from previous statements that reads: “In determining the extent of any additional policy firming that may be appropriate to return inflation to 2 percent over time,” followed by an outlining of conditions it assesses. 

For the past year-plus, this particular wording has essentially meant that the Fed was willing to keep raising interest rates until it reached its inflation goal. Remove that clause and it opens the door to potential rate cuts ahead, analysts explained.

Not only did the Fed suggest that interest rate cuts were more likely than rate hikes, but policymakers shared they envision three interest rate cuts in 2024. 

A near unanimous 17 of 19 Fed officials had projected that the policy rate will be lower by the end of 2024 than it is now – with the median projection showing it falling three-quarters of a percentage point from the current range. This means interest rates would be around 4.50 – 4.75 percent instead of 5.25 – 5.50 at the end of 2024.

Prior to the Fed’s January 2024 meeting, 4 in 10 Wall Street economists had projected that the Fed would move to cut rates as early as March, according to financial data provider FactSet. But according to the policymakers, that’s unlikely to happen.

After its January meeting, the FOMC said they won’t be ready to cut interest rates in March as they want to ensure “inflation is moving sustainably toward 2 percent” before reducing rates. 

“Inflation is still high … and the path forward is uncertain,” Fed Chair Jerome Powell said.

“It is clear that the Fed is in no hurry to ease as rapidly as the market prices, with further promising inflation data still required in order to unlock the first rate reduction,” said Michael Brown, a market analyst at Pepperstone.

Unchanged Interest Rate Puts Focus on Debt

While interest rates may not be going up anytime soon, they are still really high, which means the cost of borrowing money is still really expensive. In other words, consumers should prioritize paying down debt, given the [high] cost of borrowing at the moment, noted Greg McBride, chief financial analyst at Bankrate.

“We’ll remain in a high interest rate environment for some time to come and falling rates won’t bail you out,” he noted. “Debt repayment will need to do the heavy lifting.” 

McBride has a point. Credit card interest rates today are more than 20 percent APR on average. Credit card interest rates had been closer to 14 to 16 percent the past few years, according to Fed data. But since 2022, averages have skyrocketed to more than 20 percent APR. For accounts with revolving debt balances, the average is even higher: around 22 percent.

Outstanding credit card balances surpassed $5 trillion for the first time in more than a decade, and all stages of credit card delinquencies — 30, 60 and 90 days past due — are higher than in 2019, according to a Philadelphia Federal Reserve report.

The rate for credit card holders who were 30 days late was 3.19 percent, up from 2.76 percent the previous quarter, the Philly Fed researchers found.

Those who hadn’t paid in 60 days or more spiked to 2.21 percent from 1.91 percent, and serious delinquency of three months or more rose to 1.52 percent from 1.32 percent, according to the data.

Consumer Credit Counseling

One option for consumers who find their credit card debt is starting to spiral out of control is to work with a nonprofit consumer credit counseling service like DebtWave Credit Counseling, Inc. 

Credit counseling is designed to help consumers of all financial backgrounds, avoid bankruptcy and stop living paycheck-to-paycheck.

Since 2001, DebtWave Credit Counseling has worked closely with thousands of Americans to help them pay off credit card debt, create a savings strategy, and learn to implement healthy personal finance habits into their daily lives.

As a 501(c)3 nonprofit organization, DebtWave offers a free confidential budget analysis with a certified credit counselor to help consumers develop a workable budget for your financial situation, as well as share advice on how to better manage your finances and reduce debt over time.

DebtWave also offers financial education programs and a Debt Management Program to help you pay off your credit card debt in three-to-five years by working with your creditors directly to reduce your interest rates. In some cases, plans may extend beyond five years.

While it’s true that approximately 39 percent of Americans have credit card debt, that’s no reason to not pay off your debts. Avoiding credit card debt is especially damaging because interest charges and late fees pile up quickly, making it even more difficult and costly to become debt-free.

Nonprofit consumer credit counseling is a great way to begin your journey toward financial independence. Whether you’re looking for assistance paying off debt, looking to repair your credit, or learning how to create and utilize a budget to your financial advantage, DebtWave Credit Counseling is here to help.

When you call DebtWave Credit Counseling, Inc. for a free credit counseling session, you’ll speak one-on-one with a certified credit counselor about your finances for about 60 minutes.

During the call, a financial counselor will pull a soft inquiry on your credit, meaning it won’t have a negative impact on your credit score, but will allow your credit counselor to view your liabilities, account statuses, and credit score. Your financial counselor will also inquire about your financial goals, income, expenses, and debts, in order to provide general personal finance advice including advice on budgeting and managing money.

Monthly expenses your financial counselor may inquire about include:

• Net Income
• Mortgage/Rent
• Auto Loans
• Student Loans
• Credit Cards (balances, interest rates)
• Groceries
• Gas
• Internet
• Cell Phone
• Insurance
• Subscription Services (Netflix, Amazon, Hulu, Disney+)

In instances in which a consumer has medical debt, student loans, and/or credit card debt, a financial counselor will share all possible options for paying off that debt. 

Options financial counselors will discuss for paying off debt include:

1. Handling the debt on your own
2. Declaring bankruptcy
3. Enrolling into a Debt Settlement Program
4. Liquidating your assets
5. Enrolling into a Debt Management Program

As part of sharing your options for paying off debt, your financial counselor will share an estimated payoff date, as well as estimates for the total money paid, including interest, in order to pay off that debt.

Solutions vary because each consumer will have varying levels of debt, expenses, and financial goals.

While consumers without debt are encouraged to be proactive about their financial situation by reviewing their budget and financial goals with a certified credit counselor, the bulk of consumers who take advantage of credit counseling services do have credit card debt.

Even if your credit card debt seems manageable, asking a financial counselor to explain credit card terms or assist you in making a budget to avoid financial disaster in the future is highly encouraged.

To schedule a complimentary budget analysis with one of DebtWave’s nonprofit certified credit counselors, get started online or call 888-686-4040 to begin your journey toward financial freedom.