How The Upcoming Fed Meeting Will Impact Your Wallet

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I'm Nicole Lathen, the only financial expert you don't need a dictionary to understand. It's time for somebody, really. So for more than 100 years, the Fed has been one of the most boring institutions in the government. No offense.

It's true. But in the last few years, the Fed has really been bringing the drama.

Right now, the Fed is in the middle of one of the most important transitions in decades.

There's a new chair, there's rising inflation, a divided committee, and an upcoming meeting that has Wall Street's full attention. The Federal Reserve is, of course, the central bank of the United States. It's not where we bank at. It's a government thing.

But even so, it definitely impacts our financial lives. So I'm going to untangle how this upcoming meeting is going to impact your wallet and how the market most likely will behave. Now the reason the Fed is always in the headlines is because of the Federal funds rate. Here's how this comes up, and it's also kind of cool look into how banks actually work.

“I mean, I think it's cool, but I am nerd.”

Anyway, banks need a certain amount of money in their reserves. That makes sense. When banks lend money throughout the day, their cash balance is fluctuate. So by the end of the day, some banks might find themselves slightly short on their reserve requirements.

Rather than scramble to try and fix a short fall, they just borrow overnight from other

And when they borrow, they borrow at the Federal Fund's rate. So basically, this is the rate that banks charge other banks. Now, I'm going to get into how this affects you. Your bank is going to adjust your interest rates depending on what the rate is that they are getting from other banks.

This is the sort of same philosophy as tariffs. Businesses pass on increased costs to their customers, so that they can keep their own margins and their own business running. Your bank basically does the same thing.

“Here's the thing most people get wrong about the Federal Fund's rate.”

It doesn't directly set your mortgage rate or your car loan or your business loan. Banks definitely take a look at what the Fed is doing, but then they make their own calculations. The relationship is real, but it's not a one to one. The rate that does move directly and immediately, high yield savings accounts and money market funds.

When the Fed cuts, those rates fall fast. When the Fed raises rates, they go up. So if you're sitting on cash in a regular old savings account paying 0.01%, sorry to save it you're already losing the game. But hopefully you've already signed up for a high yield savings account with so far.

If you haven't, hang on to the end of the episode and I'll tell you exactly how. To the Fed Fund's rate is a lever that makes it easier or harder to borrow. Now the Fed is supposed to use that lever to control two things. Number one, inflation number two, unemployment. This is what's called their dual mandate and it's literally written into the law.

The Fed wants to keep inflation under control and keep unemployment low. And those two goals are constantly intention. When the economy is overheating, prices are rising too fast, inflation is running too hot. The Fed tends to raise rates. This makes borrowing more expensive as a result consumers pull back demand cools and inflation

ideally follows. When the opposite is true, the economy is sluggish and unemployment is climbing and growth is stalling. The Fed usually cuts rates. orrowing gets cheaper, companies invest, consumers start spending growth returns hooray.

That is the theory anyway. The Fed's target for inflation is 2%. As of the latest numbers, inflation though is running at 3.8% year over year. That is nearly double the Fed's target. So, based on what I just said, the Fed might want to raise Fed funds rate to cool inflation.

But it's not so simple, it never is.

Many times the year, the FOMC, that is the federal open market committee, the 12 member body that actually votes on these rates, meets for two days and releases a decision on interest rates. The next Fed meeting is June 16th and 17th. And here's the honest honest answer about what's going to happen there.

I don't know, because not only is the economy complicated, but also we have a new Fed chair. You've been hearing me talk about Jerome Powell for years now. He has been the Fed chair. We have called him Jay Powell, but his term ended on May 15th and his replacement Kevin

Worsh was sworn in. Worsh has a reputation as a hawk. That's someone who prioritizes keeping inflation low even if it means higher rates and slower growth. A dove, by the way, is someone who thinks the opposite.

And I know Wall Street loves all of its animal references. We have bulls. We have bears. We have hawks. We have doves.

Anyway, President Trump isn't really into the hawk approach. He really wants lower rates and he has been very, very vocal about this. This is where some of the drama comes in. The tension between Jay Powell and Trump was pretty public.

“You might remember, I had Austin ghouls.”

We on the pod, he is the president of the Federal Reserve Bank of Chicago. So he's in these Fed funds rates decisions.

Here's what he had to say about what it's actually like.

So can you take us in the room where it happens? So to speak. Look, if you are eConnor, like me, going to the FOMC, meaning it's just about the coolest thing there is in the world. You go in a huge room, biggest table I've ever seen in my life.

We sit around the table, the shades come down, so nobody can spy and see what's being said. Do you think of your devices? You have to give up your devices. And I famously, I was on the Fed for five minutes.

I've been there five minutes in my very first meeting. And somebody's phone goes off. It's like it's begun. They're just like taking the role. There's all these formalities at the beginning.

Do you need to do it? And I was like, what idiot brought their phone in.

“Do you need to do it in the middle of like, oh, it's me.”

It's me. I was like, I'm sorry. I'm sorry. I'm the new guy. Did you get a high mountain?

Did you get a trouble? What happened? Yeah, I got a little trouble, but they got nothing had happened yet. So I didn't get in that much trouble.

But it had never happened again.

And day one is about the state of the economy.

“And day two is about what we do with rates.”

And Jay Powell's going to say, here's what I think about the economy.

And then if you're going to walk down on President, who saw them, what do you think about the economy? President, Google's be. What do you think? It's a deliberative body.

It's got a formal aspect and after some time the transcripts will come out. So if you're really into this sort of thing, you can go read word for word, what happens at the meetings. But it's an very important deliberative body and people are coming.

They built the Federal Reserve, in the Federal Reserve Act, to have independent thought

coming from all around the country.

“That's why we have these 12 reserve banks sprinkled all around the U.S.”

And people come from very different backgrounds and very different perspectives. And it's been, it's been pretty great. So now, Worsh is in, and the president is asking for one thing, but the economy is signaling another. Again, inflation came in at 3.8% and the Fed Committee is divided.

In the last meeting, three members descended against the language signaling future cuts. They wanted an option of a hike on the table. And by the way, that level of internal descent has not been seen in over three decades. Now, I have a prediction. But first, I want to give you a warning.

Markets get 10s before Fed meetings, volatility in the S&B 500 reliably takes up right ahead of the announcement.

“Then the decision drops at 2 p.m., eastern time, and the chair holds a press conference”

at 2.30. That press conference is often more market moving than the rate decision itself, because

of the market is always trying to read what happens next, not what just happened.

The historical trend is rate cuts, send stocks up, rate hikes, send them down. But surprises are what create the real volatility here. If the market already priced in or thought a cut was about to happen and the Fed delivers when you think not even see much of a reaction. If the Fed does nothing when the market expected or thought there would be a cut, it kind

of feels like a punch in the gut. So just expect some volatility on June 17th. Here's my prediction. I do not think Worsh is going to cut rates to make the president happy while inflation is running at 3.8%.

That would be the fastest way to destroy the Fed's credibility, and whatever you might know about or think about Worsh may be based on some of the social media. I did about him. He is not a reckless guy. He knows that a central bank that loses credibility on inflation has nothing.

So I think he's going to hold. If you're waiting for your mortgage rate to fall dramatically though in 2026, I would make peace with the current reality and plan accordingly. For today's tip, you can take straight to the bank. I mentioned earlier that I would tell you about high yield savings accounts.

High yield savings accounts are exactly what they sound like. Accounts that have a much better interest rate than traditional savings or checking accounts. If you're keeping your savings in a checking account, you are killing me softly. Seriously. I'm like Tinker Bell.

And I hear somebody say that they don't believe in high yield savings account, a little part of me dies inside. If your money is sitting in a checking account, you're earning less than 0.1% interest. And I have said that number 500 times today. Inflation is eating away almost 4% of the value of your savings.

So protect, please, your hard earned money, and open up a high yield savings account. In my team, open up accounts at our partner's SoFi, you can get started at SoFi.com/MNN as in money news network or click the link in the episode description.