The Federal Reserve cut interest rates by half of a percentage point on Wednesday, kicking off what is expected to be a steady easing of monetary policy.
Consensus was split between a 25 or 50 basis-point cut, but the Fed opted for the more aggressive move, the first cut to the federal fund rates since March 2020.
Even though inflation “remains somewhat elevated,” the Fed statement said policymakers chose to cut the overnight rate to the 4.75%-5.00% range “in light of the progress on inflation and the balance of risks.”
What it might mean for U.S. consumers:
Housing
Mortgages may be the recipients of the most obvious jolt. Mortgage rates already hit a 19-month low last week of 6.2% on 30-year fixed loans, with a likely downward descent.
Car Loans
Auto loans are now at the most expensive rate since 2001, to about 8.7% for new car loans. Expect car loans, along with other private loans like student loans, to come down. Credit card interest rates should also fall.
Job Market
Companies will benefit from more accessable credit. Friendlier hiring should be expected with a boost to the bottom line.
Stocks
Rate cuts are usually a boon for stocks, as money gets pulled away from lower-yielding government bonds and money market funds, leaving investors searching for more enticing returns.
Savings
This is where the positive results usually end, with savings accounts, CDs, and money market funds losing some of their luster.
