Will the Fed Raise Interest Rates in 2024? Here’s What We Know

Inflation has been a nagging problem for U.S. consumers for the past couple of years -- one that's managed to wreak havoc on a lot of people's personal finances. And the Federal Reserve has made it clear that it's not going to allow inflation to remain stubbornly high.

In early 2022, the Fed started implementing interest rate hikes in an effort to slow inflation down. And thankfully, the central bank's efforts have paid off.

In November, the Consumer Price Index measured annual inflation at 3.1%, which is pretty close to the Fed's 2% target. That's the most recent measure we have to work with as of this writing. However, inflation started to cool well before November -- so much so that the Fed was able to leave interest rates steady at its last three meetings.

But is the Fed really done raising interest rates? Or are more rate hikes in store for 2024?

There's a good chance the Fed is done

The Fed definitely wants to bring inflation as close to the 2% mark as possible. But one thing the Fed does not want to do is cause a recession. The central bank is very aware that additional rate hikes have the potential to do just that.

As such, as long as inflation continues to cool or hold steady, there's a good chance the Fed will let things be and leave interest rates where they are to start 2024. What's more, if inflation continues to improve, we could see rate cuts at some point this year, thereby making borrowing less expensive.

Prepare for another rate hike, just in case

Some financial experts are convinced that the Fed is done with interest rate hikes. But it's important not to get too confident.

At its last meeting, the Fed released a statement that said, "The Committee remains highly attentive to inflation risks." It also said, "The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals."

If the Fed has reason to believe that inflation won't continue to trend toward the 2% mark in 2024, it won't hesitate to raise interest rates again if it deems that necessary. So consumers should remain vigilant -- especially those with variable-interest debt, such as credit card and HELOC balances.

In fact, if you owe money on a credit card or HELOC, your best bet is really to try to pay off your balance as soon as possible. You never know when the interest rate on that debt might rise. And the sooner you can put that debt behind you, the better your financial picture is apt to be.

Meanwhile, if you're looking to borrow money in 2024, whether to finance a home purchase or buy a car, pay attention to what the Fed does as far as interest rates go. If the central bank announces any sort of rate cut, that might be a good time to move on a loan application.

But also, take steps now to improve your credit score so you'll hopefully be in a great position to borrow once that becomes more affordable. You can boost your credit score by paying all bills on time and correcting errors on your credit report (which you can access for free weekly from AnnualCreditReport.com). Whittling down an existing credit card balance should also help your credit score improve.

All told, it's too soon to declare that the Fed is done raising interest rates. But there's a good chance we won't see any rate hikes in 2024, and that's a good thing for anyone who's interested in borrowing money.