The Federal Open Market Committee’s last meeting (in May) clearly described their concern over stubborn inflation (at 3.4%) and indicated they would keep the same Federal interest rate (at 5.25%-5.5%) until inflation consistently approaches the 2.0% target. They were also in agreement to increase the interest rate if inflation and unemployment increases significantly. Next meeting is on June 11-12 (next week).
On the other hand, this month, we saw the first of the Group of Seven central banks kick off an easing cycle when The Bank of Canada cut interest rates by a quarter of a percentage point (now at 4.75%). The rationale provided is that inflation in Canada (measured at 2.6%) is heading towards the 2.0% bank target.
Is this a sign that the Feds will do the same at their next meeting? Maybe, if inflation has dropped below 3%.
Any drop-in interest rate is beneficial to those seeking a new loan or mortgage BUT the opposite is true for those seeking to retire early (before age 59½) and use an exception to withdraw from the pre-tax accounts without paying a penalty … see the ‘Early Retirement:’ article below.
Edi Alvarez, CFP®
BS, BEd, MS