I Made This Move as Soon as I Heard The Fed Wasn't Raising Interest Rates in December

If you've been following economic news -- or simply been paying attention to your grocery store receipts -- you may be aware that inflation has been a persistent problem over the past couple of years. Thankfully, though, it seems to be cooling, and that's due in part to the numerous interest rate hikes the Federal Reserve implemented in 2022 and 2023.

The Fed raised interest rates 11 times between March 2022 and mid-2023. And that, in turn, drove the cost of consumer borrowing up in a big way.

To be clear, that's what the Fed wanted. The central bank was trying to disincentivize consumers from spending money to narrow the gap between supply and demand which helped cause inflation to surge.

But as inflation levels tapered off in 2023, the Fed was able to relax its policy. And during the central bank's final three meetings of 2023, the last of which took place in December, the Fed opted to hit pause on interest rate hikes.

Not only did the Fed not raise interest rates at its December meeting, but it also indicated that rate cuts could be in store for 2024. That's good news for consumers looking to borrow money this year, whether in the form of an auto loan, personal loan, or credit card balance. But it's actually not the best news for savers. As such, I took action once the Fed made its announcement.

I rushed to open a 12-month CD

Right now, CD rates are up on the heels of the Fed's recent string of interest rate hikes. Savings accounts are also paying pretty generously.

But during 2024, we could see banks start to get stingier from an interest rate perspective. The generous CD rates savers can score today may not be available later in the year.

That's why I opted to lock in a 12-month CD this past December. I managed to score a rate above 5%, which I consider a great rate -- one that justifies locking my money away in the bank for a solid year. I feared that if I waited, I'd be looking at a lower interest rate on my money.

You may want to open your CD sooner rather than later

If inflation continues to cool this year, there's a good chance the Fed will make good on the rate cuts it alluded to late last year. So if you have money you don't expect to need for a period, it pays to open a CD now, while rates are still strong.

There are numerous banks you can choose from, and it pays to compare options before committing to a CD. Look at the rates different banks are offering, and what their minimum balance requirements for a CD are.

As one example, right now, Barclays is offering a 12-month CD with a 5.00% APY. A 24-month CD only has an APY of 4.00%, and the reason for that is likely because Barclays, like all banks, is anticipating rate cuts this year. So it (like other banks) needs to be more conservative with longer-term rates. Barclays also happens to not impose a minimum for opening a CD.

Now, this isn't to say that CDs won't be worth it later on in 2024 if rate cuts arrive. But if you have money now that you don't need for emergencies or other purchases, then you might as well do what I did and lock in a great rate on a CD while you can.