What Just Happened and What to Do Next

From increased possibilities for an interest rate cut to the best areas for affordable housing, here is some news that could impact your wallet this week, and how you can prepare your finances for the week ahead.

Liberation Day Tariffs Are Finally In Affect

President Donald Trump’s “reciprocal” tariffs went into effect Thursday after four months of delays.

The tariffs come after months of negotiations between the U.S. and some of its most significant trading partners. Some countries were unable to secure lower tariff rates on last-minute trade deals. However others, like Switzerland, were unable to do so. India also now has an additional 25% tariff because it has continued to purchase oil from Russia.

According to the Yale Budget Lab, the average tariff rate on imports was 18.6% as of Aug. 7, the highest level since 1934.

What To Do Next

According to Budget Lab estimates, companies are expected to increase prices by about 1.8% to compensate for higher import costs. As a result, the average household will lose out on about $2,400 this year.

You can start preparing your budget to withstand increased prices, especially for shoes and clothing.

Two Updates Could Lead To An Interest Rate Cut

The Federal Reserve has not touched its influential federal funds rate all year. Central bankers have said they were willing to wait and see how tariffs move through the economy. They may be starting to get answers.

The Fed is tasked with keeping inflation and unemployment low. However, the most recent data shows tariffs are pressuring prices, job growth is slowing and unemployment rates are rising. This week, Fed officials said that a weakening labor market could mean the time is right for interest rate cuts.

Additionally, Fed Governor Adriana Kugler resigned last week, leaving an opportunity for Trump to fill her role. His chosen replacement, Stephen Miran, will serve the rest of her term, starting Aug. 8 and ending Jan. 31. Miran could be another vote for rate cuts, which Trump has long demanded.

What To Do Next

If the Fed cuts its influential interest rate, it will help lower borrowing costs on credit cards and auto loans. It could also potentially affect mortgage rates, but they are less likely to move in tandem with the fed funds rate.

However, that also means interest rates on investments like Certificates of Deposits and savings accounts will likely fall. Some Americans are taking this time to lock in high yields before the Fed cuts rates.

Student Loan Borrowers Are Seriously Behind On Payments

Data released Tuesday by the New York Federal Reserve shows that more student loan borrowers are becoming seriously delinquent on their payments. The rate of borrowers who are 90 days or more past due grew faster than any other debt type and is higher than before the COVID-19 pandemic.

During the pandemic, the Department of Education paused all student loan payments. If borrowers missed a payment after the pause ended, their credit scores didn’t take a hit until February. However, many borrowers have had trouble getting back into repayment.

Constantly changing policies have created a student loan environment that is completely different than what borrowers knew before the pandemic. This has made it hard for many to navigate repayment, and many are falling behind.

What To Do Next

Borrowers who have missed payments can work with their loan servicer or Federal Student Aid to get back into good standing.

The Department of Education restarted collections in May, and borrowers who haven’t made a payment in more than 270 days could see their paychecks garnished this summer. Before that happens, delinquent borrowers can apply for a cheaper payment option, set up automatic payments, or utilize forbearance and deferment.

Housing In Some States Won’t Be Affordable Even If Mortgage Rates Fell

A Zillow report from last week found that mortgage rates need to fall to 4.43% nationwide to make homes affordable. Yet in some areas, home prices are so high that 0% mortgage rates would not make housing affordable for a median-income family.

However, some places in the U.S. have low enough prices for homes to be affordable even with the current 6.7% mortgage rate level.

What To Do Next

If you are looking for a home but can’t afford the prices in your area, it may be worth looking in another state or metropolitan area with more affordable housing if you have the flexibility to move.

The Midwest and Inland South have the most metros with affordable housing. Even if mortgage rates rose above current levels, cities like Pittsburgh, Birmingham, Ala., and St. Louis would still have affordable homes.