Be Interest Rate Wise

Interest rates have become a highly visible issue, with news stories about rate changes almost every day. Much of the press coverage concerns the Federal Reserve and its chairperson, Jerome Powell. Jerome Powell became chairman when Janet Yellen retired in early 2018. 

The Federal Open Market Committee (FOMC) monitors the economy and adjusts the key “overnight loan” rate—the federal funds rate—that impacts interest rates across the economy. By changing this rate, the Fed aims to control inflation and promote long-term economic growth and maximum employment.

In 2008, the Fed reduced interest rates multiple times due to a weakening economy and to increase liquidity amid uncertainty in the subprime mortgage and broader credit sectors. By December 2008, the FOMC had lowered the target federal funds rate to a range of 0% to 0.25%, where it stayed through early 2015.

From December 2015 to December 2018, the Fed gradually raised rates in several steps to a range of 2.25% to 2.50%. Beginning in mid-2019, amid concerns about an emerging recession, the Federal Reserve cut rates by 0.25 percentage points through October 2019, bringing them down to 1.50%-1.75%. In response to the COVID-19 pandemic, the Federal Reserve quickly lowered rates to nearly zero (0% to 0.25%) in March 2020.

Post-pandemic supply chain disruptions and pent-up consumer demand drove inflation above 8% in 2022, leading to aggressive rate hikes. The Fed raised rates seven times in 2022, including four 0.75% hikes, and eventually targeted a range of 5.25% to 5.50% by mid-2023. It remained at that level through much of 2024 as inflation declined.

As inflation continued to decline and signs of a softening labor market appeared in late 2024 and into 2025, the Fed shifted to a more accommodative stance. It implemented several 0.25% cuts in the second half of 2025: one in September (to 4.00% to 4.25%), one in October (to 3.75% to 4.00%), and one in December (to 3.50% to 3.75%). This reduced the target range by 1.75% from its 2024 peak.

As of February 2026, following the FOMC meeting on January 28-29, 2026, the Fed has kept the target federal funds rate unchanged at 3.50%-3.75%. Recent data shows the effective federal funds rate has been around 3.64%. Policymakers cited solid economic growth, decreasing unemployment, and somewhat elevated (but declining) inflation as reasons for holding steady, with two dissenters favoring another cut. Markets and Fed projections indicate limited room for further easing—such as one or two 0.25% cuts later in 2026—depending on upcoming data,

Interest rates also play a major role in our economy and in our daily lives, especially when it comes to borrowing.

Develop a Borrowing Strategy

Using credit wisely can be a key part of your personal and business financial plans.

• Use common sense. Never borrow what you can’t repay. Prioritize your borrowing based on long-term value. Reserve some borrowing capacity for emergencies.
• Consider all the terms. Borrowing can be confusing. Review all the terms and conditions before you sign any credit application.
• Get help if you need it. If your borrowing gets out of control, take immediate steps to solve the problem. Contact lenders to work out a repayment plan. Quit using (or cut up) credit cards. Seek the help of a qualified credit counselor.

Where Interest Rates are Headed

Interest rates have risen from their recent historical low levels. They may go higher, or they may not. Accurate predictions of future interest rate movements are almost impossible. To take advantage of XXXX’s current low rates, here are two ideas to consider:

Real Estate Loans

Mortgage rates are low, as are many home equity loan rates. Now is an excellent time to get a mortgage on a new home, refinance an existing mortgage, or use a home equity loan to consolidate your debt at a lower rate (and possibly enjoy tax benefits). XXXXX offers mortgage programs to suit almost any need. Visit our website – XXXX.com - to review our programs and see the current rates. You can even apply online.

Credit Cards

Not all credit cards are the same. Differences in fees, interest rates, and benefits should all be considered when choosing the card that makes the most sense for you. If you carry balances and pay interest on them, having a card with lower interest rates can save you hundreds or even thousands of dollars each year. For example, with an average balance of $5,000, the difference between an 8% and 18% rate amounts to $500. It’s important to compare rates, so we invite you to look at our low rates. Visit our website – XXXX.com – and see how our credit card can help you save money.

Note

This article was written with the assumption that you would customize it with your financial institution’s name in the areas marked with bold XXXXX.