When does everyone think the prime rate will be reduce?

[mfinsmi1]

I swear the fact prime rate is over 8% is just crazy. I just got an APR reduction to 14.99 + prime , but because prime is so high that brings my apr over 20%. When is the prime rate gonna go down - 6 months? 1 year? 2 years? 5 years?

[sccredit]

It actually is not insane from a historical perspective. A lot of people have a skewed understanding of prime interest because of monetary policy over the past 15 years. Prior to that a FED rate of 5% was considered low. 

As far as when rates will drop...when inflation meets the FED target. IMO I don't see it dropping this year at all, I see it continuing to rise based on today's unemployment and inflation numbers. 

[ForwardLooking]

I am not worried about high prime rates on cards to be honest.  I use my cards mainly as a tool to help manage monthly cash flow and pick up 2-3% cash back while paying off the card in full each month.  I only have one card with a balance right now -- Discover, but I used it to do a balance transfer to close out an old personal loan I had and am now paying on it with 0% interest over time.  If the higher APR scares you off, consider looking at a credit union that caps their interest rates.  My Navy Federal cards cannot go higher than 18% for example.

[805orbust]

Honestly @mfinsmi1 it's all cyclical. I honestly believe it'll sort itself out in 5 years.  However that  said, I believe you'll see them halt rates for a few sessions before they begin lowering slowly.  I don't see them lowering prime before another 24 months has gone by.  It will settle down tho at some point and normalize. 

[Anonymalous]

---

@sccredit wrote:

It actually is not insane from a historical perspective. A lot of people have a skewed understanding of prime interest because of monetary policy over the past 15 years. Prior to that a FED rate of 5% was considered low. 

As far as when rates will drop...when inflation meets the FED target. IMO I don't see it dropping this year at all, I see it continuing to rise based on today's unemployment and inflation numbers. 

---

This. The last couple decades have been completely abnormal, from a historical perspective. The question is whether we'll revert to a period of more normal rates, or whether they'll be able to use monetary policy to keep adding to the house of cards for a while yet, before it all collapses.

The Fed is still talking hawkish. But while Powell has been more aggressive fighting inflation than expected, the market seems to think the Fed'll be more dovish. But the market really, really wants a pivot (on interest rates) to pump up the prices of their stocks, so they have a bit of a bias.

We've also got a spectacular number of recession indicators in the red, right now. Which would make inflation one of the smaller problems. And stagflation is also on the table.

[Thomas_Thumb]

---

@mfinsmi1 wrote:

I swear the fact prime rate is over 8% is just crazy. I just got an APR reduction to 14.99 + prime , but because prime is so high that brings my apr over 20%. When is the prime rate gonna go down - 6 months? 1 year? 2 years? 5 years?

---

Certainly not this year. Inflation continues to stay high with unemployment remaining low. I anticipate additional rate hikes this year until unemployment rises to 4.5%.

Market could drop up to 20% from where it is with no serious rally. Anticipate a dead cat bounce 3Q23 followed by a drop to pre-bounce levels in Nov/Dec.

Hopefully the Fed can signal an end to rate hikes late 4Q23. Perhaps a small market rally late 1Q24 into early 2Q24. Feds may try easing rates a bit starting 6/24 in an effort to bolster the economy prior to November elections. However, persistant inflationary pressures will likely impede implemention of further rate reduction efforts. Unfortunately, unemployment may need to reach 5% to really impact inflation - imo.

The above are purely guestimates

[Tdatb64]

After Biden leaves office.

I know these interest rates are high but at least savings accounts are almost paying some interest, these days. I remember opening my first savings account in the early '70s at 7 3/4%. I never thought I'd see sub-1% rates on savings!

[LakeLife]

---

@mfinsmi1 wrote:

I swear the fact prime rate is over 8% is just crazy. 

---

December of 1980, "Hold my beer!":  21.5%.  But at least we could use it as a deduction for our Federal Taxes back then.

[805orbust]

Do any of you believe these economic numbers?  I'm not saying that we're being lied to, however I don't see reality being as these numbers are portrayed.  There have been tumbleweeds for at least 15 months in our industry.  Doesn't seem to jive with the numbers being given. 

Something smells really fishy.

[hdporter]

---

@805orbust wrote:

There have been tumbleweeds for at least 15 months in our industry.  Doesn't seem to jive with the numbers being given. 

---

So I take it that you're not in IT or construction ...