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Inflation wreaked havoc on Americans’ finances for much of 2022 and 2023. But thankfully, things have been better this year, with annual inflation rising at a much slower pace.

Since annual inflation had been steadily creeping downward toward the 2% mark, which is the Federal Reserve’s ideal inflation target, the central bank lowered its benchmark interest rate twice this year — first in mid-September and again in early November. And with one more meeting on the calendar in mid-December, the Fed has an additional opportunity to cut rates before the end of the year.

But inflation took a surprising turn in October. And at this point, a third rate cut in 2024 is looking iffy.

A small but notable increase in inflation

October’s Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services, showed that annual inflation rose by 2.6%. That’s not an alarmingly high rate of inflation. It’s also only a modest uptick from September’s CPI reading, which measured annual inflation at 2.4%.

But in the eyes of the Fed, this looks like a step backward. And when the Fed lowered its benchmark interest rate in November, it warned that it would continue to monitor inflation and adjust its stance on rate cuts as necessary. Given October’s higher CPI reading, it’s now questionable as to whether the Fed will move forward with a third rate cut in December vs. holding rates steady.

How interest rate cuts affect your wallet

The Fed isn’t in charge of setting consumer borrowing rates. When you sign a mortgage, your specific lender dictates what rate you get. And when you put an auto loan in place, your lender sets the rate for that, too.

But borrowing rates tend to rise and fall in line with the Fed’s benchmark interest rate, known as the federal funds rate. If the Fed makes another rate cut late this year, it could set the stage for more affordable borrowing in 2025. And if the Fed holds rates steady, it could mean that some people will need to wait longer to take out a more affordable loan.

Of course, the Fed’s rate cuts aren’t the best news for savers, as they’ve been causing savings accounts and CDs to pay less. If the Fed hits pause on rate cuts in December, consumers will get a little more time to earn extra interest on their savings or to open a CD while rates are strong.

Ultimately, since it’s too soon to know what the Fed will do in December, your best bet may be to prepare for either scenario. If you’re hoping for a rate cut so you can save money on a loan you sign in early 2025, work on boosting your credit score so you’re more likely to qualify and snag a great deal. That way, even if the Fed doesn’t make another rate cut, you’ll still be in a stronger position to borrow.

Similarly, if you’re worried about a December rate cut and have money you want to earn interest on, open a CD sooner rather than later. Also, make sure you’re earning as much interest on your savings as possible. If your bank isn’t paying you around 4%, check out this list of the best high-yield savings accounts today.

Without a crystal ball, it’s hard to put a finger on what the Fed will do next month. It’s best to prepare for all possible scenarios, just in case.

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