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Inflation has stalled. Now what?

Anand Talwar
April 2, 2024
3 min read

A few months into 2024, we've had an initial glimpse at the year's financial outlook. The Federal Reserve has continued to leave interest rates unchanged, although we may see a rate cut in the fall months. Here's what you need to know if you're planning for any life changes, like paying off your debt or buying a house.

Inflation has stalled ...

Inflation has been heading downward since its peak, but not as quickly as some forecasts anticipated. March saw an increase in the Consumer Price Index (or CPI, a top measurement of inflation), bringing it to 3.5% over the last 12 months. Although that's down from the 9.1% peak in June 2022, the CPI report has been hotter than expected to start the year.

The Fed is targeting a 2% CPI (or at least more consistent movement toward 2%) before lowering interest rates, so there’s still some cooling off that needs to happen. In the meantime, consumers may continue feeling some pressure. Keeping your money organized in spending buckets through an Ally Bank Spending Account can help you track the costs of your trips to the supermarket or your commuting expenses.

... So expect higher rates for now

Interest rate cuts might not be immediate, but they are still on the horizon for 2024. The current market indicates that any changes in interest rates will be pushed later into this year — and likely with fewer rate reductions — than predicted. Earlier this year, the market indicated a high likelihood for an initial rate cut in June 2024, but a slower-than-expected decrease in inflation has moved that forecast into the second half of the year.

This might be frustrating news if you’ve been waiting for lower rates. But with current interest rates, now’s the time to take advantage of higher annual percentage yield , or APY, on a savings or money market account and build out your savings strategy.

Tip: When savings APY does decrease, having some money invested can help diversify your portfolio. You might use an investment account to try to balance any rate changes.

Hot homebuying season?

Moving into spring, which is typically the hot homebuying season, many potential buyers have their eyes on the housing market . But with the slow downward movement of inflation, don’t let current mortgage interest rates hold you back from a home purchase. Whether your homebuying timeline is next month or a year from now, you’ll want to prepare your emergency fund and down payment so you’re ready to pull the trigger when the right house comes along.

Market movement for the start of 2024 is looking a little slow, but that doesn’t mean your financial plans should be put on hold.

If you’re pre-approved for a mortgage and financially prepared to buy, purchasing a home now could help you get ahead of surging demand when rates decrease. And if rates drop significantly down the road, you could have the opportunity to refinance and reallocate the money saved on your monthly mortgage payments, potentially paying down debt, increasing savings or investing.

Tackle any debts

It's always important to focus on paying off debt, but periods of potential interest rate decreases can bring an opportunity to adjust (or create) your payment plan. Reducing your debt utilization helps boost your credit score — an important factor in securing loans and financing. Creating a plan to pay down debt is a smart way to take control of your finances and put yourself in a good position for the future.

What's right for you

Interest rate cuts may be on hold so far this year, but the S&P 500 has hit record highs in Q1. Now is the time to check in on your personal plan and financial goals — there’s no one-size-fits-all approach. Set clear goals and plan to withstand movements in the market, because these changes are outside of our control. That way, if and when rates do fall, you’ll be ready to make the most of it.

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