What will the federal interest rate be in 2024?
At its second gathering of 2024, held March 19 and 20, the Federal Reserve once again declined to adjust interest rates. It similarly held rates steady after its inaugural 2024 session in January. The federal funds target rate has remained at 5.25% to 5.5% since summer 2023, the highest it's been in over 20 years.
We forecast PCE inflation to slow to 2.0% y/y before the end of this year —much earlier than the Fed's estimate. Importantly, the SEP projects that the Federal Funds rate will fall to 4.6% in 2024, 3.9% in 2025, and 3.1% in 2026. This implies three 25 basis point rate cuts in 2024.
Many experts predict interest rates will remain at their current level for most of 2024. This may mean that mortgage rates stay at or about the same level as now for many months before possibly starting to fall towards the end of 2024.
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.
Some banks have raised rates during this period of uncertainty to incentivize existing customers and attract new ones. In January 2022, the typical APY, or annual percentage yield, for a one-year CD sat at a mere 0.13%—a pandemic low, according to FDIC data. As of April 2024, average one-year CD rates are at 1.81%.
The expected decreasing inflationary pressure, plus the added impact of a falling federal funds rate in 2024, is likely to push mortgage rates lower. But while the Fed raised its benchmark rate fast in 2022–2023, it's expected to bring rates down at a much more gradual pace in 2024 and beyond.
For the end of 2026, the median dot now shows a target range of 3% to 3.25%, versus 2.75% to 3% three months ago. And officials' median longer-run estimate was for a target range of 2.5% to 2.75%, also a quarter of a percentage point higher than in December.
WASHINGTON (AP) — Federal Reserve officials signaled Wednesday that they still expect to cut their key interest rate three times in 2024, fueling a rally on Wall Street, despite signs that inflation remained elevated at the start of the year.
Driving the news: The median Fed official now expects interest rates to be somewhat higher in 2025 and 2026 than they did in December — anticipating fewer rate cuts will be justified in the coming two years. The median projection for the longer-run rate also ticked up, to 2.6% from 2.5%.
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
How long is interest rate future?
These futures can also be short-term or long-term. Short-term interest rate futures have an underlying instrument with a maturity of less than one year, while long-term interest rate futures have an underlying instrument with a maturity of over one year.
You can find 6% CD rates at a few financial institutions, but chances are those rates are only available on CDs with maturities of 12 months or less. Financial institutions offer high rates to compete for business, but they don't want to pay customers ultra-high rates over many years.
| Institution | Rate (APY) | Minimum Deposit |
|---|---|---|
| Quorum Federal Credit Union | 5.35% | $100,000 |
| Credit One Bank | 5.35% | $100,000 |
| Third Federal Savings & Loan | 5.25% | $100,000 |
| CD Bank | 5.25% | $100,000 |
Waiting to open a CD could mean missing out on some stellar rates. Now, you can lock in high rates on both short-term and long-term CDs and, you can score some serious interest just by opting to deposit a larger lump sum into your CD.
The Federal Reserve is likely to cut interest rates at least once in 2024, with the largest share of officials expecting three cuts. The timing and frequency of rate cuts will depend on a variety of factors, including inflation and the labor market.
Interest Rates for 2021 to 2027. CBO projects that the interest rates on 3-month Treasury bills and 10-year Treasury notes will average 2.8 percent and 3.6 percent, respectively, during the 2021–2027 period. The federal funds rate is projected to average 3.1 percent.
The bottom line
Sure, mortgage rates could fall to 3% at some point, but chances are that's not going to happen anytime soon. Moreover, waiting for rates to drop before you buy your home could backfire. Instead, consider buying your house now and refinancing your mortgage when rates improve.
"Shorter CD rates won't collapse and will still offer far higher yields than the ones we experienced in 2021 and prior years," Krumpelman says. "Even in 2025, we expect short CDs to pay more than 3%."
Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
As recently as December 2023, the futures market gave March 2024 rate cuts a 77% probability of occurring. Even Fed officials themselves are predicting lower rates soon, with 17 of 19 projecting that the funds rate will be lower at the end of 2024 than it is now.
What will be the interest rate in 2030?
Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.
| Year | Forecast 1 year Rate | Change |
|---|---|---|
| Mar, 2024 | 7.25% | |
| Mar, 2025 | 6.50% | -0.75% |
| Mar, 2026 | 5.50% | -1.00% |
| Mar, 2027 | 5.00% | -0.50% |
Once you find a rate that is an ideal fit for your budget, lock in the rate as soon as possible. There is no way to predict with certainty whether a rate will go up or down in the weeks or even months it sometimes takes to close your loan.
Many experts expect the Fed will begin dropping rates in the second half of 2024, so long as inflationary pressures continue to ease.
Money market account rates are expected to drop in 2024, similar to savings and CD rates. The Federal Reserve's decisions will influence changes in money market account rates.
