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Money moves you can make to take advantage of the Fed cutting interest rates again

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The Federal Reserve will cut interest rates for the third time since July as many experts and traders continue to worry about the strength of the global economy due to ongoing trade disputes. The cut of 25 basis points, or a quarter of a percentage point, puts interest rates at a significantly lower level than they were a year ago.

"The uncertainty surrounding the trade situation is casting a dark shadow on business spending and business investment," says Greg McBride, chief financial analyst at Bankrate. That uncertainty, he says, has spooked the Fed enough to "warrant some preemptive action — specifically, reducing interest rates as they have since July."

Low-rate environments can be useful to consumers, too, if you make the right moves.

Smart money moves to make when interest rates go down

It may take some time before you notice lower interest rates filter down to your savings accounts or lines of credit. Regardless, here are a few smart money moves you can make once the rate cut kicks in.

Check in on your savings and investments

Lower rates typically mean that any savings you have in the bank will earn less interest, so it may make sense to shop around for higher rates on savings accounts, or invest your money in a CD, which makes your money unavailable for a predetermined amount of time (two years, for example) and in return generally earns you a higher interest rate.

Also, you may want to consider rebalancing your portfolio. Sam Stovall, chief investment strategist at CFRA Research in New York, anticipates sectors that benefit from lower interest rates to surge in the coming months. "Utilities, real estate, consumer staples have done well" in low-rate environments, he says.

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Look at refinancing

If you've been holding off on refinancing your mortgage or other loans, now may be the time to act.

"Mortgage rates are a full percentage point below where they were a year ago," says McBride. So, if you bought a home in, say, 2018, McBride suggests you look at what refinancing options are available to you. Those could lower your monthly payments and save you a lot of money in the long run.

Consider making a big purchase

Lower rates may bring down the cost of a significant purchase, like a home, a car, or a home appliance. With the average car payment near an all-time high, locking in financing with a lower rate is likely to save you money — and the same goes for mortgages.

Experts expect this to be the last rate cut for a while

This rate cut comes at a time when the stock market is hitting new all-time highs, and it's expected that the markets could climb even higher as a result of the Fed's decision. "Stock market investors love low interest rates," McBride says.

Still, this may be the last one for some time. Experts expect that, after this third cut, the Fed will sit back and see what happens next before making further decisions.

The Federal Reserve's target funds rate
The Fed sets this benchmark rate, which influences the rates lenders offer on savings accounts, credit cards, mortgages and other products. The central bank has cut interest rates three times in 2019, its first reductions since 2008.
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kiersten schmidt/grow Federal Reserve

Many investors expect a pause, too. "More likely than not, they're going to want to hold off on doing more," says Stovall. "After three rate cuts, Wall Street ... wouldn't be surprised if the Fed goes on hold for now."

McBride adds the rate cuts don't address the substantial underlying economic issue, which is that the U.S. is still involved in a trade war with China: "Lower interest rates do provide a little bit of a boost to the economy, but they're not going to resolve the trade uncertainty."

They do grease the wheels of the economy, though, by making it cheaper for businesses and consumers to borrow, so consider whether and how it makes sense for you to benefit.

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