When I'm not hosting this podcast, I am writing books, but it is really hard for me to write when I'm at home, so I like to find remote cabins in the middle of nowhere to just hang out and write. But I hate the idea of my house just sitting empty, doing nothing but collecting dust and definitely not collecting checks. And that's why I'm an Airbnb host. It's one of my all-time favorite side hustles. Other popular side hustles are awesome, too, don't get me wrong, but they often involve big startup costs. By hosting your space, you're monetizing what you already have access to. It It doesn't get easier than that. And if you're new to the side hustle game and you're anxious about getting started, don't worry, because you're not in this alone. Airbnb makes it super easy to host. I mean, if I could do it, you could do it. And your home might be worth a lot more than you think. Find out how much at airbnb. Com/host. Did you know that some travel credit cards offer 10X points on your spending? Don't miss out on big rewards for your next trip. Nerdwallet lets you compare smart travel credit cards side by side, curated by an expert team of finance nerds.

What could future you do with better travel rewards? A free flight? A room upgrade? Don't wait to make smart financial decisions. Compare and find smarter credit cards, savings accounts, and more today at nerdwallet. Com. Reminder, credit is subject to lender approval and terms apply. Nerdwallet, finance smarter. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Last week, the Fed decided to keep interest rates steady. Now, in general, we know how interest rate changes affect us. Higher interest rates means it's more expensive to get money, which means things like mortgages, the APR on your credit card, pretty much all vehicles for borrowing money get more expensive. But if you're the one lending money, which is in effect what you're doing when you're buying a CD or a bond or even open a high yield savings account, higher interest rates are good for you. And lower interest rates means it's easier to get money, cheaper mortgages, cheaper personal loans, but less ROI on bonds and high yield savings accounts. Of course, interest rates were slashed during COVID and then boosted to curb inflation. Over the last year, the Fed started slowing down the interest rate hikes because inflation started to fall.

But at the top of this year, the Fed was optimistic that they would be able to start cutting interest rates. However, inflation seems to be fighting back more than experts anticipated. So as Rockstar Economist Nouriel Rabini said on the pot on Monday, We'll see what's actually possible with interest rate cuts. But the net trend seems to be that interest rate hikes are at least starting to mellow out. But has that trend really been reflected in our wallets yet? Not really. Mortgages are still super expensive. The average credit card APR is still over 20%, and categories like car insurance and household repairs are still up double digits from last year. Given all this info, there's an obvious next question. If interest rates really are the lever that is supposed to take the heat off our wallet, is the solution broken? In order to really answer that, we have to look at the mechanics of that lever. As we know, probably now better than in any point in history, the Fed controls interest rates. And fun fact, the Fed is divided into three entities to meet all of the responsibilities of making the economy healthy. Yes, we do love divvying up our government bodies into threes in this country, don't we?

Well, the three entities are the Federal Reserve Board of Governors, the Federal Reserve Banks, and the Federal Open Market Committee, or the FOMC. With the Fed, there's a lot of minutiae and paperwork and bureaucracy that you really don't need to know, but there are a few things that would be helpful to understand. First of all, the Fed is always supposed to serve the public interest, not private companies or the small elite fraction of the national population. But how do we make sure that they're always kept honest? Well, one of the branches of the Fed, the Board of Governors, is an agency that answers to Congress. By reporting According to Congress, in theory, this agency is supposed to be put in front of the citizen-elected officials and therefore kept accountable. The entity that is most newsworthy, at least right now, is the Federal Open Market Committee or the FOMC. The FOMC has two very big jobs. First, creating monetary policy, and second, managing the country's money supply. One big way the FOMC tips the scales of the economy is by determining how much interest banks can charge when they lend money from their reserves to other banks.

This The interest rate, known as the Fed Funds Rate, is what's adjusted in response to the needs of the economy, and this is the interest rate that everybody is talking about. So the Fed isn't directly setting the interest rate that you're going to pay for your mortgage, but it starts a cascade effect that flows from what banks are able to charge each other in interest to your wallet. Once the Fed changes the rate banks charge each other for loans, in response, banks will then adjust the rates they offer to people. That's where your mortgage and your loans start to be affected. If the Fed Funds Rate goes up, banks raise their rates for borrowers to maintain their profit margins. The reverse is true when the Fed funds rate goes down. Banks typically will lower their rates for borrowers. This flowchart also has another path, which adds businesses as an intermediary step between banks and people. Because banks don't just loan money to people, they loan money to businesses, too. A higher Fed funds rate means higher borrowing costs for businesses. This might lead to businesses delaying or scaling down plans for expansion, which can mean slower economic both, possibly fewer new jobs or force price increases to the products they sell.

So this domino effect does reach consumers. So why are we still feeling so much financial pressure? Well, the easiest answer is that the Fed hasn't started cutting rates yet, and inflation hasn't been fully brought under control yet. So we shouldn't expect to see lower rates on our personal finances just yet. The more complicated answer is, while the Fed funds rate is important and certainly influential in the financial world, it That isn't the only factor that affects purchases. If you're a prospective home buyer, your housing cost isn't just your mortgage rate, right? The actual price of the house is pretty important, too, and those prices are affected by supply and demand, not just the Fed funds rate. So while we can't map out our financial plan entirely based on what the Fed decides to do with interest rates, we can make that a part of our overall financial strategy. For example, while the Fed was too optimistic when they started talking about rate cuts, experts like Dr. Rubini are still predicting cuts this year. If you're considering a loan, you might want to wait until rates drop, which will save you money in interest rates over the lifetime of the loan.

If rates drop, the yields on assets like CDs will drop as well. If you're thinking of purchasing a CD, now is the time to lock in those print yields. I know it has felt like hard economic times, and so the decisions the Fed makes can feel different, but they do ripple through the economy to affect all of us, from Wall Street to Main Street. And by understanding how these rates are set and manipulated, you're better equipped to make informed decisions about loans, savings, investments, the major financial food groups. For today's tip, you can take straight to the bank. The FOMC next meeting is in June, and around that time, be careful with your investment portfolio. The stock market is very, very sensitive to changes in the Fed funds rate. The rule of them is typically that an announcement of a lower rate makes the stock market very, very happy. So I would recommend beware of the timing of these Fed meetings because the stock market will likely show some movement around these times, and it's not necessarily always the best time to take a big risk. Money Rehab is a production of Money News Network.

I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your moneyquestions, moneyrehab@moneynewsnetwork. Com, to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram @moneynews and TikTok @moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.