3 ways to prepare for the next Fed rate hike
Hopes that inflation was on a permanent downward path were dashed last week after a report for September showed it remaining untouched from the previous month. At 3.7% currently — above the Fed's target 2% rate — there's still some work to be done. And the Federal Reserve is likely to do it by raising interest rates even higher than the 5.25% to 5.50% range they currently sit at.
"We are attentive to signs that the economy may not be cooling as expected," Federal Reserve chairman Jerome Powell said over the summer. "We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."
Considering that inflation has been stuck since those comments, many expect another rate hike to come before the end of the year. And it's possible, if not likely, that it could come after the Fed meets again later this month. While even higher interest rates aren't good news for borrowers, there are some steps Americans can take now to prepare for the next Fed rate hike.
3 ways to prepare for the next Fed rate hike
Here are three ways to prepare for the next increase in interest rates.
Open a high-yield savings account
High-yield savings accounts operate just like regular savings accounts, albeit at much higher interest rates. While rates on regular accounts are just 0.46% currently, the returns on high-yield savings accounts are many times that with online high-yield accounts close to 6% currently.
And since the rates on these accounts are variable — meaning they're likely to change each day — it can be particularly helpful to open one now. By opening a high-yield savings account today, savers will be best positioned to immediately start earning a higher rate if and when the Fed bumps them up again.
Get started with a high-yield savings account here now!
Explore your CD options
CDs are also offering savers a great way to protect and grow their funds now, with some of the top-earning accounts hovering close to 7% currently. That said, if savers open a CD right now, they could lose out on the opportunity to open an account with a slightly higher rate in the weeks to come.
In the interim, then, savers should do their research and compare rates, banks and terms. By doing so today, they'll know which lender is best for them and be best prepared to open an account with that institution after the Fed increases rates again.
Start shopping for a top-earning CD here.
Invest in gold
In today's inflationary environment, many have turned to gold. In fact, gold investing hit an 11-year high earlier this year. And it's easy to understand why. Gold can act as a hedge against inflation, providing some stability when other assets look shaky.
And it can diversify your portfolio, helping keep your overall portfolio steady. Plus, it's a tangible asset. If you want to buy more, sell some or store what you're already invested in, it's easy to do.
The bottom line
Higher interest rates can make borrowing more expensive, but they can also make the returns on savings significantly better, too. By opening a high-yield savings account now, you'll be well prepared to earn an even higher APY in the weeks to come. And by doing your CD research today, you'll know exactly which lender to use when rates are higher. In the interim, consider an investment in gold to help diversify your portfolio and hedge against the still-strong effects of ongoing inflation.
