Credit Sesame’s personal finance news roundup September 21, 2024. Stories, news, politics and events impacting personal finance during the past week.
Fed cuts Federal funds rate and signals more to come
The Federal Reserve announced that it would be cutting the Federal funds rate by 0.5%. It’s new target range for this rate is from 4.75% to 5.00%. The main reason the Fed gave for the rate cut was the progress inflation has made in falling towards the Fed’s target of 2%. Beyond the immediate rate cut, the Fed released updated economic projections that indicate it expects more cuts will follow. The latest projections suggest the Fed expects the Fed funds rate to drop by about 0.5% more by the end of this year, and by another 1% by the end of next year. These would represent much more aggressive rate cuts that the Fed had indicated in its previous set of economic projections. See press statement at FederalReserve.gov.
Kroger’s takes big step in fight over credit card fees
Foods Co, a California subsidiary of Kroger’s, has announced it will no longer accept Visa credit cards in its stores. A spokesperson for Kroger’s said the ban may be widened to include all of Kroger’s stores. Kroger’s is one of the country’s largest grocery chains. At issue are processing and network fees on Visa credit cards. Retailers and credit card companies have been battling over those fees for some time. The move by Kroger’s is a gamble that they will save more in fees than they will lose in business by restricting customers’ choice of credit cards. See article at SupermarketNews.com.
U.S. Households wealthier than ever
U.S. household wealth rose to $163.8 trillion last quarter, the highest level ever. The rise in wealth was primarily driven by a $1.8 trillion increase in real estate values and a $700 billion gain in stock values. Households are borrowing heavily against this wealth, with household debt rising at a 3.2% annual rate during the quarter. While asset values more than offset household debt, borrowing against illiquid assets and long-term investments puts finances at greater risk. See article at Reuters.com.
Q3 retail sales exceed expectations
Retail sales grew by 0.1% in August 2024. While that’s only a slight gain, it’s significantly better than the 0.2% decline expected by economists. In addition, the original estimate of a 1.0% gain in retail sales for July was upgraded to 1.1%. These mild improvements are consistent with the soft economic landing the Fed has been shooting for. That would involve reining in growth enough to cool inflation, but without triggering a recession. This scenario would allow the Fed to continue cutting interest rates gradually. See article at Yahoo.com.
Banking regulator seeks stricter requirements for fintechs
The FDIC has proposed stronger recordkeeping rules for financial technology companies, known as fintechs. Fintech companies have been offering banking services without registering as banks by consolidating customer accounts and depositing their money in banks. This can leave banks unaware of the identities of the end-user customers. That can cause confusion over who owns the money if the fintech acting as middleman fails. Just such a scenario played out earlier this year when Synapse Financial Technologies failed. The FDIC has proposed that banks working with fintech companies must know the identity of each customer and track each customer’s balance separately. That will allow customers more orderly access to their money if the fintech goes out of business. See article at Reuters.com.
Consumer watchdog pushes stricter enforcement of overdraft fee rules
The Consumer Financial Protection Bureau (CFPB) has published new clarification of the documentation banks must maintain to charge customers overdraft fees. By law, customers must agree to opt into overdraft protection before they can be charged a fee when their overdrafts are covered by a bank. However, in many cases banks do not have documentation of whether or how the customer’s consent was given. The CFPB’s new guidelines would require banks to retain documentation of customer opt-in agreements for overdraft protection and the associated fees. See news release at ConsumerFinance.gov.
Mortgage rates take another big fall
30-year mortgage rates fell by 0.11% last week, to 6.09%. 30-year rates are now 0.52% lower than they were when the year began, and have fallen by a total of 1.70% since peaking late last October. This leaves 30-year rates at the lowest level they’ve been since early February, 2023. 15-year rates took an even bigger step lower last week, falling by 0.12% to 5.15%. The sustained drop in mortgage rates is in reaction to mounting evidence that inflation has eased. See rate details at FreddieMac.com.
Weekly news headlines from Credit Sesame
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