JPMorgan CEO Jamie Dimon's Recent Warning Has Some Hidden Good News for Savers

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The Federal Reserve doesn't take kindly to rampant inflation. In fact, it's the Fed's job to oversee monetary policy and adjust interest rates to keep inflation at a moderate level.

In 2022 and 2023, the Fed raised interest rates numerous times in an effort to slow inflation. And it seems as if the Fed has been successful, since the pace of inflation has come down.

But has it come down enough to warrant interest rate cuts? That's the big question. And JPMorgan CEO Jamie Dimon isn't convinced that interest rates are about to drop very soon.

We may not see rates come down for a while

In mid-July, Dimon issued a warning following the release of the most recent Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services. June's CPI, released in July, showed that inflation increased 3% on an annual basis.

That's an improvement over previous inflation levels, but it's not as low as the Fed wants inflation to be. The Fed has long targeted 2% as its ideal inflation rate.

When the Fed raises its benchmark interest rate, which it did in 2022 and 2023, the cost of borrowing tends to rise across the board. So nowadays, consumers are paying higher interest rates on everything from mortgages to auto loans to credit card balances. And on top of elevated living costs, that's causing a strain.

The Fed has signaled that it's looking to cut interest rates due to cooling inflation. But because inflation isn't quite at the Fed's ideal level, the central bank may not be so quick to cut interest rates. And that's problematic for consumers who are struggling to sign or keep up with loan and credit card payments.

Meanwhile, Dimon's recent stance on inflation wasn't exactly favorable to consumers and investors who are eager to see rates come down. He said, "There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us...therefore, inflation and interest rates may stay higher than the market expects."

Clearly, this isn't what cash-strapped borrowers want to hear. But it's actually great news for savers.

How savers can benefit from higher interest rates

When you owe money on a credit card or loan, a lower interest rate is preferable to a higher one. But when you have money in a savings account , you want the highest interest rate possible, since that gives you an opportunity to earn more interest on the money you're keeping in the bank.

The silver lining with persistent inflation and higher interest rates is that savers get to benefit. These days, it's easy to find a high-yield savings account with an APY in the 4.00% to 5.00% range. So if you have extra money to put into savings today, you should do so to capitalize on strong interest rates while you can.

Now's also a good time to open a CD if you have some money you don't expect to need for another six to 12 months, or even a bit longer. A longer-term CD, like a 36-month CD, may fit into your financial plans, too, such as if you have a child starting in college in three years and want a safe return on your money between now and then.

Generally speaking, the best CD rates today can be found for terms of six to 12 months, but there can be exceptions. So your best bet is to research different banks' rates and see what's available.

The right CD term won't be the same for everyone

That said, it's also okay to pick the CD term that works for you, even if it means that you're not getting the absolute best interest rate out there. If you have plans to buy a home in about a year but want to earn a little extra money on your savings, a 6-month CD may be your best option either way.

If you open a 12-month CD, your money might still be tied up at the time when you're ready to make an offer. But if you know for sure that you won't be ready to use your money for a down payment in just six months, then that's the ideal term for you.

All told, higher interest rates aren't a completely bad thing. So if you have money you don't need for near-term bills, it pays to put that cash into a high-yield savings account. And if you have money you don't need for emergencies and won't be using for a period of time, then now's definitely when you want to lock in a CD. With many CDs paying APYs of 5.00% or even a little bit more, that's a pretty sweet risk-free return for you to enjoy.

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