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The Federal Reserve (Fed) plays a key role in the U.S. economy. The Fed can increase or decrease the rate that banks charge each other for short-term loans to influence the economy, whether to stimulate investment, promote economic growth, and / or respond to inflation, among other objectives. In early 2020, the Fed reduced its Target Fed Funds rates to almost zero percent.
The Fed’s interest rate changes may also influence the rates offered by banks on deposit and credit products, though banks consider additional factors when determining the interest rate offered to customers. In a low to zero interest rate environment, the steps to take depend on your accounts and financial priorities. Here are some tips to consider in response to this interest rate environment.
The Fed’s low to zero interest rates may influence you, depending on what deposits, loans, and other accounts you have. For example:
However, if your loan has a fixed interest rate, such as a fixed rate mortgage, your loan will not be impacted by changes in the interest rate environment. In addition, your monthly principal and interest payment will also remain the same.
Here are some actions to consider in this low interest rate environment.
During these times, it can be challenging to determine what to do next or whether to take any action at all. Whether interest rates decrease or increase, your deposits in the FDIC-insured accounts at Wells Fargo have the protection of FDIC insurance within the maximum applicable limits.
We’re committed to helping with your financial success. Here you’ll find a wide range of helpful information, interactive tools, practical strategies, and more — all designed to help you increase your financial literacy and reach your financial goals.
Before you apply, we encourage you to carefully consider whether consolidating your existing debt is the right choice for you. Consolidating multiple debts means you will have a single payment monthly, but it may not reduce or pay your debt off sooner. The payment reduction may come from a lower interest rate, a longer loan term, or a combination of both. By extending the loan term, you may pay more in interest over the life of the loan. By understanding how consolidating your debt benefits you, you will be in a better position to decide if it is the right option for you.
Information and views provided are general in nature and are not legal, tax, or investment advice. Wells Fargo makes no warranties as to accuracy or completeness of information, including but not limited to information provided by third parties; does not endorse any non-Wells Fargo companies, products, or services described here; and takes no liability for your use of this information. Information and suggestions regarding business risk management and safeguards do not necessarily represent Wells Fargo’s business practices or experience. Please contact your own legal, tax, or financial advisors regarding your specific business needs before taking any action based upon this information.
Wells Fargo and Company and its affiliates do not provide tax or legal advice. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.
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