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The Federal Reserve held rates steady at the end of its two-day meeting Wednesday.
Many economists believe this concludes the central bank’s rate-hiking cycle, which aimed to bring down inflation without tipping the economy into a recession.
Still, the combination of higher rates and inflation has hit household budgets particularly hard.

The Federal Reserve announced it will leave interest rates unchanged Wednesday, in a move that many believe will conclude the central bank’s rate hike cycle and set the stage for rate cuts in the year ahead.
The Fed has raised interest rates 11 times since March 2022 — the fastest pace of tightening since the early 1980s. The spike in interest rates caused consumer borrowing costs to skyrocket while inflation remained elevated, putting many households under pressure.

Although the central bank indicated it will continue to pursue its 2% inflation target, “the real question at this stage is when they’ll begin cutting,” said Columbia Business School economics professor Brett House.
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The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.
Here’s a look back at how the central bank’s rate hike cycle affected everything from mortgage rates and credit cards to auto loans and student debt, and what may happen to borrowing costs next.
Credit card rates jumped to nearly 21% from 16%
Most credit cards come with a variable rate, which has a direct connection to the Fed’s benchmark rate.

After the previous rate hikes, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.
Between high inflation and record interest rates, consumers will end the year with $100 billion more in credit card debt, according to data from WalletHub. Not only are balances higher, but more cardholders are carrying debt from month to month.
Going forward, APRs aren’t likely to improve much. Credit card rates won’t come down until the Fed starts cutting and even then, they will only ease off extremely high levels, according to Greg McBride, chief financial analyst at Bankrate.
“Credit card debt is high-cost debt in any environment but that’s particularly true now and that’s not going to change,” he said.
Mortgage rates hit 8%, up from 3.2%
Although 15-year and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home lost considerable purchasing power, partly because of inflation and the Fed’s period of policy tightening.
In fact, 2023 was the least affordable homebuying year in at least 11 years, according to a report from real estate company Redfin.
“Mortgage rates rocketed higher from record lows to more than 20-year highs,” McBride said.
After hitting 8% in October, the average rate for a 30-year, fixed-rate mortgage is currently 7.23%, up from 4.4% when the Fed started raising rates in March of 2022 and 3.27% at the end of 2021, according to Bankrate.

A “For Sale” sign outside a house in Edmonton, Alberta, in Canada on Oct. 22, 2023.
Nurphoto | Nurphoto | Getty Images

Already, though, housing affordability is showing signs of improvement heading into the new year.
“Market sentiment has significantly shifted over the last month, leading to a continued decline in mortgage rates,” said Sam Khater, Freddie Mac’s chief economist. “The current trajectory of rates is an encouraging development for potential homebuyers,” he added, kickstarting a “modest uptick in demand.”
McBride also expects mortgage rates to ease in 2024 but not return to their pandemic-era lows. “You are still looking at rates in the 6s, not rates in the 3s or 4s,” he said.
Auto loan rates surpassed 7%, up from 4%
Even though auto loans are fixed, car prices had been rising along with the interest rates on new loans, leaving more consumers facing monthly payments that they could barely afford.
The average rate on a five-year new car loan is now 7.72%, up from 4% when the Fed started raising rates, according to Bankrate.
“The largest segment of consumers financing a new car today has a 7.9% APR,” said Ivan Drury, Edmunds’ director of insights. “That’s a far cry from those spring 2020 pandemic deals of 0% financing for 84 months that drove significant sales of large trucks and SUVs.”
But despite high interest rates, vehicle affordability is improving, with new car prices decreasing year over year and sales incentives increasing.
“The new-vehicle market is shifting to a buyer’s market, not a seller’s market,” according to Cox Automotive research.
Federal student loans are at 5.5%, up from 3.73%
Federal student loan rates are also fixed, so most borrowers weren’t immediately affected by the Fed’s moves. But undergraduate students who took out new direct federal student loans this year are paying 5.50%, up from 4.99% in the 2022-23 academic year and 3.73% in the 2021-22 academic year.
Private student loans tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means those borrowers are paying even more in interest. How much more, however, varies with the benchmark.

Now that federal student loan payments have restarted after a three-year reprieve, interest is also accruing again, and the transition back to payments has proved painful for many borrowers.
However, if the Fed cuts rates in 2024, that may open the door to some refinancing opportunities, which could help.
High-yield savings rates topped 5%, up from 1%
While the Fed has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid-19 pandemic, are currently up to 0.46%, on average, according to the Federal Deposit Insurance Corporation.
Top-yielding online savings account rates have made more significant moves and are now paying over 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.
Even though those rates are peaking, “from a savings standpoint, 2024 is still going to be a really good year for savers because inflation is likely to decline faster than the yields on savings accounts,” McBride said.
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CNBC’s senior personal finance correspondent Sharon Epperson shared advice with high school students at Junior Achievement of Middle Tennessee’s Finance Park program.
She also participated in the capstone program with a real-life career and budgeting simulation for the students.
“The experience lets them touch it, feel it and see it before they have to be it,” said Trent Klingensmith, president of Junior Achievement of Middle Tennessee.

NASHVILLE, Tenn. — As Tennessee leads many states in financial literacy in public high schools, Junior Achievement of Middle Tennessee aims to boost those lessons through career, entrepreneurship and personal finance programs.
Speaking to high school students in December at Junior Achievement’s Finance Park program in Nashville, CNBC’s senior personal finance correspondent Sharon Epperson shared her career journey and offered personal finance tips.

“You’re going to be something that you want to be — whatever that is — because you will have the tools to do it,” she said.

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Here are three personal finance tips Epperson shared with the high school students.

1. Open a high-yield savings account

2. Invest in a Roth individual retirement account

With a part-time job, “you’re already set up to be an investor,” Epperson told the students. “Not just a saver, but an investor.”

Here’s why: With so-called earned income, students can contribute to a Roth individual retirement account, which provides tax-free growth on investments. You contribute after-tax money but won’t owe taxes on Roth IRA withdrawals in retirement. Tax-free earnings are powerful for younger investors with decades until their golden years.

3. Avoid credit card debt

Epperson also warned students about the “risk of plastic” and amassing credit card debt, which can be difficult to pay back.
To avoid problems, she suggested, use a prepaid card for purchases and join a parent or guardian’s credit card as an authorized user before applying for a student credit card at age 18.

Opportunity to ‘make adult decisions’

After speaking, Epperson participated as a volunteer in Finance Park, Junior Achievement’s capstone financial literacy program, which gives students the chance to “make adult decisions before they’re adults,” according to Trent Klingensmith, president of Junior Achievement of Middle Tennessee, which serves 22 counties.
After 13 classroom-based lessons, Finance Park culminates with a real-life budgeting simulation at Junior Achievement’s facility — including savings, investing and debt payoff — based on the student’s career decisions.

The experience lets them touch it, feel it and see it before they have to be it.

Trent Klingensmith
President at Junior Achievement of Middle Tennessee

“The experience lets them touch it, feel it and see it before they have to be it,” said Klingensmith.
While the organization aims to have 32,000 Middle Tennessee students participate in various programs during the 2023-2024 school year, the “biggest need is volunteers,” Klingensmith said.

‘You leave a little seed in their brain’

Volunteers participate with students during every step of Finance Park. It’s a rewarding experience for board member Claudia Zuazua, who often works with the program’s Latino students.
Born and raised in Mexico City, Zuazua, who is bilingual, said she knows the cultural differences many Latino students face when learning about personal finance — especially when English is a second language.
“They know there’s someone who understands,” said Zuazua, who has also lived in Peru and Colombia. In Metro Nashville Public Schools, nearly one-third of enrolled students were Hispanic during the 2022-2023 academic year, compared with only 1.6% of teachers.
Finance Park offers the chance for students to explore career opportunities while practicing real-world money management skills. “You leave a little seed in their brain,” Zuazua said. “I think that’s what matters.” 
Correction: After 13 classroom-based lessons, Finance Park culminates with a real-life budgeting simulation at Junior Achievement’s facility. An earlier version misstated the time frame. More

Deflation is the opposite of inflation: it’s when prices fall instead of rise.
In the U.S., deflation is happening across categories like food, energy and household goods, according to consumer price index data.
A strong U.S. dollar, untangled supply chains and quirky measurement dynamics play a role.

Thomas Barwick | Stone | Getty Images

Inflation has been falling gradually across the U.S. economy.
This process, known as disinflation, means prices for consumer goods and services are rising but at a slower pace than they had been.

However, inflation has actually turned negative in some sectors, like energy. Deflation, as this dynamic is known, is the opposite of inflation: when prices are going down, not up.

Why some categories are deflating

Largely, deflation is happening on the “goods” side of the U.S. economy, or the tangible objects that Americans buy, economists said.
There are several reasons for this.  
For one, a strong U.S. dollar makes imported goods cheaper. Some of those savings get passed on to consumers, said Mark Zandi, chief economist at Moody’s Analytics.
A strong dollar is a likely contributor to deflation in certain categories like household furniture and appliances, Zandi said. Additionally, weaker demand may be a factor: Households that spent liberally on home goods in the early days of Covid-19 lockdowns are likely no longer doing so, he added.

Broadly, the pandemic snarled global supply chains, causing shortages that fueled big spikes in prices. Energy costs surged when Russia invaded Ukraine, pushing up transportation and other distribution costs.
Now, supply chain disruptions are largely in the rearview mirror, economists said. The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index, for example, has fallen back to pre-pandemic levels from historic highs at the end of 2021.
“You’ll see inflation has followed basically the same pattern” as the index, with a few months’ lag, said Lael Brainard, director of the White House National Economic Council.

Energy costs have declined. In fact, energy prices, which include categories such as gasoline and electricity, fell 5.4% in the year through November, according to the consumer price index.
“The inflationary effects of the pandemic and the Russian war in Ukraine are increasingly in the rearview mirror,” Zandi said.
Falling energy costs also contribute to deflation among certain grocery items, since transportation is a key input cost for retail food prices, economists said.
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Some prices, like those for airline tickets and eggs, are also falling back to earth after hitting record-high levels. The latter, for example, soared largely due to a historically deadly bout of avian flu among egg-laying hens. Egg and airline ticket prices are down about 22% and 12% in the past year, according to CPI data.
Consumers also seem to be “more judicious” in their purchases as things have gotten more expensive, an important factor in influencing businesses to be more cautious about how they price, Zandi said.

Goods prices, after stripping out those for energy and food, have deflated for six consecutive months, according to CPI data.
“I think there’s further deflation in the pipeline as you see a stronger inventory picture and signs of consumer demand beginning to wane,” said Sarah House, senior economist at Wells Fargo Economics.

How measurement quirks affect prices

Some deflation is due partly to measurement quirks.
For example, the U.S. Bureau of Labor Statistics, which compiles the CPI report, controls for quality improvements over time. Electronics such as televisions, cellphones and computers continually get better. Consumers get more for roughly the same amount of money, which shows up as a price decline in the CPI data. 
Health insurance, which falls in the “services” side of the U.S. economy, is similar.

The BLS doesn’t assess health insurance inflation based on consumer premiums. It does so indirectly by measuring insurers’ profits. This is because insurance quality varies greatly from person to person. One person’s premiums may buy high-value insurance benefits, while another’s buys meager coverage.
Those differences in quality make it difficult to gauge changes in health insurance prices with accuracy.
These sorts of quality adjustments mean consumers don’t necessarily see prices drop at the store — only on paper.  
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Year-end Planning

If the current stock market rally added profits to your portfolio, tax-gain harvesting could help rebalance your assets or reduce future taxes.
The lesser-known approach involves strategically selling profitable brokerage account assets while in the 0% long-term capital gains bracket.
“Tax gain harvesting is like a strategic chess move in the world of investing,” said CFP Sean Lovison, founder of Purpose Built Financial Services.

Westend61 | Westend61 | Getty Images

If the current stock market rally added profits to your portfolio, a lesser-known strategy could help rebalance your assets or reduce future taxes.
The strategy, known as tax-gain harvesting, allows you to leverage lower earning years by strategically selling profitable brokerage account assets.

“Tax gain harvesting is like a strategic chess move in the world of investing, ideal for those in the 0% long-term capital gains tax bracket,” said certified financial planner Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services.

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“Combined with multi-year tax planning, it is a smart play when you’re in a low-income year but expect to be in a higher tax bracket in the future,” said Lovison, who is also a certified public accountant.

How tax-gain harvesting works

You can use tax-gain harvesting when you fall into the 0% capital gains bracket, which applies to long-term capital gains or assets owned for more than one year. 
For 2023, you may qualify for the 0% rate with taxable income of $44,625 or less for single filers and $89,250 or less for married couples filing jointly. Those thresholds are even higher for 2024, adjusting to $47,025 for single filers and $94,050 for married couples.
These rates apply to your “taxable income,” which is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

However, you also need to consider state capital gain taxes because “every state is a bit different,” warned Stephen Maggard, a CFP and enrolled agent with Abacus Planning Group in Columbia, South Carolina.

Resetting the basis can be a ‘game-changer’

One of the perks of tax-gain harvesting in the 0% bracket is the chance to reset the asset’s purchase price, or “basis,” according to Lovison. 
“This move can be a game-changer” because it can significantly reduce future taxable gains, especially when selling profitable assets in higher earning years, he said.

While the so-called wash sale rule blocks a tax break for losses when investors repurchase the same asset within 30 days, that doesn’t apply to harvested gains, Lovison said. This means you can sell and immediately repurchase the same asset to increase the basis.
The 0% capital gains bracket could also be an opportunity to “rebalance or divest of a concentrated position,” especially for new retirees who haven’t yet started required minimum distributions, said CFP Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts. More

The resumption of student loan payments this fall means borrowers can claim the interest deduction again at tax time.
Here’s what to know.

Fizkes | Istock | Getty Images

There’s one piece of good news for student loan borrowers bummed out by the resumption of their bills this fall: They may be eligible for a break on their 2023 taxes.
The student loan interest deduction allows qualifying borrowers to deduct up to $2,500 a year in interest paid on eligible private or federal education debt.

During the pandemic-era pause on student loan bills and interest accrual, which spanned more than three years, most borrowers with federal loans lost their eligibility for the break because they weren’t making payments on their debt, and most loans were set to a 0% interest rate.
“You can claim the student loan interest deduction based only on amounts actually paid,” said higher education expert Mark Kantrowitz.
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Interest on federal student loans began accruing again in September, and the first post-pause payments were due in October. That means borrowers could have three or four months’ worth of payments to deduct for 2023, which may reduce their tax liability.
Before the Covid pandemic, nearly 13 million taxpayers took advantage of the tax break.

Here’s what else borrowers need to know:

Look out for a 1098-E from your servicer

Income, employer aid may reduce eligibility

Depending on your tax bracket and how much interest you paid, the deduction could be worth up to $550 a year, Kantrowitz said.
The deduction is “above the line,” meaning you don’t need to itemize your taxes to claim it.
There are income limits, however.
The deduction starts to phase out for individuals with a modified adjusted gross income of $75,000, and those with a MAGI of $90,000 or more are not eligible at all. For married couples filing jointly, the phaseout begins at $155,000, and those with a MAGI of $185,000 or more are ineligible.
Borrowers’ eligibility for the deduction may also be reduced if their employer made payments on their student loans as a work benefit, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

Lawmakers want to expand break

House lawmakers introduced a bill this month to expand the student loan interest deduction from $2,500 in annual interest to $10,000. Under the proposed law, eligible borrowers could also claim an extra $500 deduction for each dependent, and they’d be able to deduct all student loan payments, not just the interest portion.
The deduction’s $2,500 cap hasn’t been raised since 2001, despite the fact that student borrowers’ balances have ballooned. More

Your Money

Over the next decade, women in the U.S. will capture a significant share of the money changing hands as part of the greatest generational wealth transfer in history.
Experts weigh in on how to maximize this unprecedented opportunity.

Women control only about one-third of all financial assets in the U.S., but that is about to change.
As part of the great wealth transfer, women are expected to inherit much of the $68 trillion in wealth that baby boomers are passing down, according to research by McKinsey.

Whether husbands are leaving money to their wives, or couples are passing a nest egg down to their children, women stand to benefit disproportionately, the research showed.
“It’s an unprecedented time in history that is giving women an opportunity to put themselves in a financially secure position,” said Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York. She is also a member of the CNBC Financial Advisor Council.

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How the great wealth transfer may benefit women

Until now, women have lagged in financial resources and opportunity, largely due to a persistent gender wage gap. Women today still earn only 80% of what their male counterparts do. 
Women are also more likely to work part-time and take time off over the course of their careers, often to care for children or other family members, according to the Pew Research Center.
At the same time, their life expectancy is five years longer than that of men.

Rockaa | E+ | Getty Images

“The statistics are sobering,” said Kelly O’Donnell, chief client officer at Edelman Financial Engines. “The math tells us it’s harder for women because they are going to live longer and have less.”
But by 2030, the next generation of women stand to inherit a significant portion of the $68 trillion being passed down as part of the greatest generational wealth transfer in history.
“This is the first time in history that women are able to gain significant wealth,” Francis said.

How women can set themselves up for success

“My hope is that this opportunity can put women on a financially secure path, but it’s not a no-brainer,” Francis said. “We just need to make sure they have the tools to keep that financial stability.”
Those who take a proactive role in their financial lives face fewer risks, but the first steps to getting there also don’t have to be overwhelming.
“If you are set to inherit a significant amount of money, you are going to need financial advice,” said Maggie Wall, head of diverse growth markets at Citizens.

Even before meeting with an advisor, women should “go in prepared,” Wall said, including compiling a rundown of assets and a list of goals, which may include securing a retirement plan, paying off student debt, buying a home or traveling, as well as what they hope to leave behind for their families.
“That knowledge creates confidence, it creates peace of mind, and it creates more engagement,” Francis said. And with that, “women can use a large inheritance and set themselves up for the rest of their life.” More

The Seraya Partners Fund I has raised $800 million, closing above its target of $750 million, according to a statement Tuesday by its Singapore-based managers, Seraya Partners.
Other major investors include China-led Asian Infrastructure Investment Bank (AIIB) and pension fund Alberta Investment Management, as well as sovereign wealth funds and family offices from North America, Europe and Asia-Pacific.
Investor interest in this asset class in the last few years largely stems from a desire for stable returns at a time of high inflation and heightened volatility in public markets.

Wind turbine blades rotate in the tidal flat in Yancheng city, Jiangsu province, China, November 18, 2023.
Nurphoto | Nurphoto | Getty Images

Top global asset managers including BlackRock are among investors in an Asia-focused infrastructure private equity fund that raised $800 million, underscoring growing interest in the asset class amid market volatility.
The Seraya Partners Fund I closed above its target of $750 million, according to a statement Tuesday by its Singapore-based managers, Seraya Partners.

The fund targets mid-market investments aimed at enhancing energy transition and digital infrastructure development in Asia-Pacific markets and Southeast Asia.
“Infrastructure remains an attractive asset class,” said James Chern, chief investment officer and managing partner at Seraya Partners.
“Most major players have yet to put focus on capital deployment in the mid-market infrastructure space in Asia. The mid-market valuation is typically 30% lower than large cap deals in Asia, U.S., Europe deals generally.”
Investor interest in this asset class has been rising in the last few years, largely stemming from a desire for stable returns at a time of high inflation and heightened volatility in public markets.
KKR reportedly raised nearly $6 billion for its second Asia-Pacific infrastructure fund in October last year, closing seven months after its launch.

Seraya Partners counts China-led Asian Infrastructure Investment Bank (AIIB) and pension fund Alberta Investment Management among its major investors, as well as sovereign wealth funds and family offices from North America, Europe and Asia-Pacific.
The Asia-managed fund says it has already deployed half the money raised in three platforms.
The AIIB estimates $1.7 trillion of investment have to be made annually through 2030 to meet current demand for sustainable infrastructure.
“Asia’s rapidly expanding cities, intensifying climate change, and aging infrastructure have created a pressing need to address the region’s burgeoning trillion-dollar infrastructure gap,” said Chern, who was formerly with Morgan Stanley.
“Energy transition and digital infrastructure will be the twin engines to bridge this gap and lead us toward net-zero ambitions,” he said.

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Since the Secure Act of 2019, Roth individual retirement account conversions have become more attractive for legacy planning, experts say.
When retirees pass away, their adult children are often in their “peak earning years” and they generally must empty inherited IRAs within 10 years.
However, a Roth IRA provides tax-free withdrawals, as long as the account has been open for five years.

Only 41% of investors with more than $1 million have a plan for passing on their wealth to future generations, UBS says.
kate_sept2004 via Getty Images

As retirees consider their legacy, a popular income tax-saving strategy has become more common, experts say.
The strategy, known as a Roth individual retirement account conversion, transfers pretax or nondeductible IRA money to a Roth IRA, which begins future tax-free growth. The trade-off is upfront taxes on the converted balance.

“Roth conversions are now becoming more of a piece of legacy planning for some clients,” said certified financial planner Ashton Lawrence, director at Mariner Wealth Advisors in Greenville, South Carolina.
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Before the Secure Act of 2019, heirs could stretch IRA withdrawals over their lifetime, which helped reduce yearly income and tax liability. However, certain heirs, including most adult children, now have a shorter timeline to empty inherited IRAs.
When retirees pass away, their children will “probably be in their peak earning years” with a relatively high tax bracket, Lawrence said.
That can create a tax problem because adult children generally must empty inherited IRAs over 10 years following the original account owner’s death, he said. The rule applies to accounts inherited on Jan. 1, 2020, or later.

How Roth conversions can benefit heirs

With many IRA heirs facing a 10-year withdrawal window, “Roth conversions look even more attractive today,” said Robert Dietz, national director of tax research at Bernstein Private Wealth Management in Minneapolis.
Generally, adult children still must empty inherited Roth IRAs within 10 years. However, withdrawals are typically income tax-free, as long as the account has been open for at least five years.
Sometimes, the tax burden is lower when parents pay levies on the Roth conversion upfront, rather than their children paying taxes on IRA withdrawals, Lawrence said. But families need “legacy conversations” and tax projections before making that decision. 
Of course, the original IRA owner should also weigh the financial consequences of boosted income for Roth conversion years, such as higher Medicare Part B and D premiums.

Planning for higher income tax brackets

With income tax hikes on the horizon, some investors may consider a few partial Roth conversions, according to Dietz.
Without changes from Congress, lower income tax rates will sunset after 2025. Prior to 2018, the individual brackets were 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. However, five of these brackets are lower through 2025, at 10%, 12%, 22%, 24%, 32%, 35% and 37%.

“For a lot of our clients, we’re looking at Roth conversions over a three-year period,” Dietz said.
The plan is to complete partial Roth IRA conversions from 2023 through 2025 and fill up the client’s desired tax bracket each year, depending on projected taxable income, he explained.Don’t miss these stories from CNBC PRO: More