Rate Cuts Are Coming—Here’s What Smart Investors and Savers Are Doing

Ahead of the Federal Reserve’s upcoming meetings on June 17 and 18, inflation rates are showing new warning signs. In May, consumer rates rose by 0.2%, which brought the inflation rate to 2.4%, which was a 0.1% increase from the previous month. This is another move in the wrong direction in relation to the Fed’s longstanding goal of a 2% interest rate.

Most analysts expect rates to hold firm for now, continuing a pause that comes on the heels of three rate cuts in late 2024. With inflation creeping back up and ongoing concerns about tariffs impacting prices, the Fed has ample reason to wait before trimming rates again.

While everyone wants rates to come down, the delay could actually give you an edge. While we don’t know exactly when the next rate cut will come, you can act before the next rate cut. It also means that you can start putting together a plan concerning what you’ll do after the Federal Reserve interest rate cut. Keep reading to find out how to prepare for the Fed rate cut before and after it happens.

3 Things to Do Before the Fed Rate Cut

Being strategic with your money before the Fed rate cut to make money with the money that you already have.

Boost Your Income With a HYSA

A high-yield savings account (HYSA) allows you to passively put your money to work for you. Many traditional savings accounts earn 0.1% APY, while HYSA accounts earn 4%. This means that over the course of a single year, you can earn $399 more. That interest builds over time. Within three years, a traditional account with $10,000 in it would have $10,005 while a HYSA would have $12,167. The compounding effect allows you to put even more money in your pocket. If you’re looking for the best savings account 2025, a HYSA is a great option.

Lock in High Rates With Long-Term CDs

While HYSAs are useful, they come with variable interest rates that can change with the market. While the interest rates can increase, they can also drop with benchmark rate cuts from the Fed. That’s why you should consider investing in a CD. For instance, opening a 12-month CD that earns 4% APY, you’ll earn 4% over the entire 12 months, even if HYSA rates drop. That guarantees you a return of $400 on a $10,000 CD.

Audit Your Investment Portfolio

Tariff policies and ongoing concerns, inflation rates higher than 2%, and ongoing economic uncertainties have created volatility, even in markets that have long been considered stable. With so much uncertainty surrounding the economy, it’s hard for analysts to determine how to project future earnings. While a certificate of deposit may not generate as much income as a stock that booms in value, it does offer a safe way for you to earn passive income while you wait for the Fed to make a decision about rates.

3 Things to Do After the Fed Rate Cut

There is going to be a Fed rate cut, even if it doesn’t take place when the Fed meets on June 17 and 18. Taking the aforementioned steps before the cut can help set you up for success, but there are some things you can do following the cut to take full advantage of it.

Refinance Your High-Interest Debt

Refinancing after an interest rate cut, at least when it comes to high-interest debts, gives you a chance to get on more solid ground with your finances. When you opt for refinancing after an interest rate cut, you can cut down on the amount that you’re spending each month. Even if you keep making the same payments as before, you can get the debt paid off quicker.

Be Strategic With Large Purchases

If you’re financing your large purchases, you know what a strain that can put on your finances over time. However, if you plan to borrow to cover the cost of these high-cost purchases, you’ll pay less interest if you wait for rates to come down. You can also look for credit opportunities that come with 0% APR. Generally, these terms last for anywhere from one to two years, allowing you to repay the debt without any interest. Whether you’re looking at a kitchen remodel or building onto your home, strategically waiting for a rate reduction is a great idea.

Take Out a New Loan

Many people choose to refinance after an interest rate cut because it’s essentially the same as taking out a new loan. Even if you’re not going the refi route, taking out a new loan when rates drop is a sound financial move. Debt consolidation loans or taking out a mortgage for your dream home when rates are down puts more money in your pocket during and after the terms of the loan. If you go this route, make sure to shop around for different rates and understand each loan’s terms and conditions.

For Now, We Wait

It’s all but certain that rates aren’t going to drop at the Fed’s next meetings. However, that doesn’t mean that you need to sit on the sidelines. By being strategic before rates drop, you can set yourself up to reap the full benefits of lower rates when the time comes.